Singapore: Brent crude fell below $112 (Dh411.37) a barrel yesterday, as fears of another US recession slowing fuel demand overshadowed supply concerns over a major shutdown of offshore oil production forced by Tropical Storm Lee.
US employment growth ground to a halt in August, reviving recession fears and piling pressure on both President Barack Obama and the Federal Reserve to provide more stimulus to aid the frail economy.
Front-month Brent fell 88 cents to $111.45 a barrel by 0624 GMT. Brent plunged almost $2 a barrel on Friday on the disappointing jobs data released in the United States.
US crude was down a dollar to $85.45 a barrel, after settling $2.48 lower at $86.45. Friday's losses wiped out part of US crude's 4.1 per cent gain in the week through Thursday.
"The macro situation is leading to fears of a double-dip recession. And there has been a recent trend of selling into strength when the market hits a soft patch," said Chen Xin Yi, a commodities analyst at Barclays Capital in Singapore.
"That said, the fundamentals in the oil market remain strong and any upside surprise in macro data releases from what is evidently now a low base of expectations should spur further gains."
Asian stocks followed Wall Street lower yesterday, after the US Labour Department said employers added no net new jobs last month and July's total was revised lower.
Political and legal tests
Compounding fears of a recession in the United States, Europe faces a string of political and legal tests this week that could hurt efforts to resolve its sovereign debt.
In China, the services sector grew in August at the lowest pace on record, a private survey showed, as new orders ebbed and tightening measures to rein in an exuberant property sector started to pinch.
Worsening economic woes may raise the odds of another bond buying programme, or quantitative easing, by the US Federal Reserve. That could cheapen borrowing, weaken the dollar, and encourage investment in commodities as an asset class.
"This is likely to bring further calls for quantitative easing, despite the Fed's apparent aversion," said CMC Markets market strategist Michael McCarthy in a research note.
Brent oil will fall further to $109.01 per barrel, while US oil is also expected to fall more to $84.20 per barrel, according to Reuters market analyst Wang Tao.
Providing some support for prices was oil companies' shutdown of more than half the crude production in the US Gulf of Mexico due to Tropical Storm Lee, which is hindering efforts to restaff and restart oil and gas platforms in the basin.
Lee reached Louisiana's coast early Sunday, but was moving inland very slowly. Its 75 km/h winds grounded helicopters on standby for oil and gas companies that would have otherwise ferried workers out to do post-storm assessments and restaff facilities.