Brent crude oil fell below $110 a barrel today, dragged down by a firm dollar and worries over weak global economic growth after disappointing German data.
Initial enthusiasm has faded over planned economic stimulus measures and steps by central banks in the United States, Europe and Japan to boost asset markets as data has shown growth rates still slow and consumer confidence ebbing.
German business sentiment dropped for the fifth successive month in September, Munich-based think tank Ifo said today, a sign companies are being hit by the euro zone debt crisis which is squeezing demand and investment.
Brent crude futures for November fell $2 a barrel to a low of $109.42, before recovering slightly to trade around $109.75 by 1035 GMT. US crude was $1.30 lower at $91.59 per barrel.
Brent dropped 4.5 per cent last week, while US crude lost 6.2 per cent on demand worries and a pledge by Saudi Arabia to supply enough oil to the market to keep prices down.
The Ifo business climate index, based on a monthly survey of some 7,000 firms, fell to 101.4 in September from 102.3 in August, defying expectations for a slight rise. A Reuters poll of 45 economists had forecast a slight increase to 102.5.
A firm dollar, which makes commodities denominated in the greenback more expensive for investors in other currencies, also deterred buying, adding to the pressure on oil futures.
The dollar index rose 0.5 per cent as the euro reeled under increasing uncertainties in Spain and Greece, and other Asian currencies gave way to profit booking.
Financial markets have been supported for most of the month by the announcement of a third-round of quantitative easing by the US Federal Reserve, increasing tensions in the Middle East between Iran and Israel and delays in North Sea oil shipments.
The Fed and the Bank of Japan have both launched fresh monetary easing measures in recent weeks, while the European Central Bank has adopted a plan to buy bonds from euro zone states requesting assistance to help drive down borrowing costs.
While all markets rallied following the announcements, the focus has once again shifted to worries on the euro zone debt crisis, as well as weakness in the United States and key Asian consumers such as China and India.
Escalating tension in the Middle East offered some support to prices, after Iran hinted at the possibility of a pre-emptive strike on Israel.
Reuters