Brent slips below $111

Thursday, 20 October 2011 00:05 - - {{hitsCtrl.values.hits}}

SINGAPORE (Reuters): Brent crude slipped below $111 on Wednesday as concerns over demand growth weighed after Moody's Investors Service cut Spain's sovereign ratings by two notches, adding to uncertainty over the euro zone's debt crisis and economic growth.

Moody's said the downgrade was partly due to the challenge Spain faced in meeting its fiscal target because of the region's worsening growth prospects. The cut, ahead of a key meeting of European policymakers this weekend, capped gains in Asian stocks and base metals, and pulled the euro lower.

Brent crude fell 25 cents to $110.91 a barrel at 0703 GMT, after slipping as low as $110.82. U.S. crude slipped 11 cents to $88.23 a barrel, after sliding to $87.93.

"Participants lack clear confidence in the market and that will result in prices trading in a very narrow range till the outcome of the European Union meeting is known," said Ken Hasegawa, a commodities derivatives manager with Newedge Brokerage in Tokyo. "The U.S. benchmark will inch closer to $90 this week, and that is a very important point technically."

Moody's said that, in particular, it continues to have serious concerns regarding the funding situation of Spain's regional governments.

Brent is expected to drop to the previous trading session's low of $108.45 per barrel, while U.S. crude may inch up to $89.76 a barrel as the unexpected sharp rise on Tuesday signals a rebound that started from the Oct. 4 low of $74.95 per barrel has not completed, Reuters technical analyst Wang Tao said.

Crude prices are getting support from the unexpected decrease in crude stocks in the United States, the world's biggest oil consumer.

Crude stocks fell 3.1 million barrels in the week to Oct. 14, oil trade group American Petroleum Institute said on Tuesday, while analysts had expected a 1.8-million-barrel increase. Gasoline stocks fell 1.6 million barrels, more than the 1.3 million barrel fall expected by analysts.