The concerns over a further slowdown in the euro zone economy, which could lead to lower oil demand, overshadowed supply disruptions in the U.S. Gulf due to a storm and in strike-hit Norway.
Brent crude dropped by 82 cents to 90.16 dollars a barrel, having briefly touched as low as 89.86 dollars. Both contracts turned negative around the time of the European market open.“ Another round of European sovereign debt issues … and bearish fundamentals have already started to weigh on oil prices,” Morgan Stanley said in a research note. If OPEC production continues at today’s levels, stocks would build above normal through the third quarter and supply would outstrip demand in 2012.”
European shares and the euro also fell. Investors were skeptical that a June 28 to June 29 European Union summit would make any substantial progress towards tackling the euro zone debt crisis, now in its third year and buffeting Spain, the region’s fourth largest economy.
German Chancellor Angela Merkel agreed on Friday with leaders of France, Italy and Spain on a 130 billion euros (156 billion dollars) package to revive growth. But Merkel said on Monday she was concerned that there would be too much focus on shared liability for debts at a forthcoming EU summit, and underlined again her opposition to this.