Brent crude falls on demand concerns, fragile economies

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Brent crude oil fell for a second day on Tuesday over concerns about lower demand in a well-supplied market and as the United States and Europe grappled with fragile economies.

Oil prices came under pressure from an International Energy Agency report that cut estimates for global oil demand in the last three months of this year and for growth in 2013.

The IEA also said Iran's production and exports had rebounded in October, despite Western sanctions, adding to the amount of crude oil in the market.

"What we can see now is that the market is well supplied," IEA Executive Director Maria van der Hoeven told the annual "Oil & Money" conference in London.

At the same event, OPEC Secretary General Abdullah al-Badri agreed: "There is no shortage anywhere in the world."

By 2:25 p.m. EST (1925 GMT), Brent crude for December delivery was down 79 cents to $108.28 a barrel, having fallen to a low of $107.38 during the session.

U.S. December crude settled down 19 cents at $85.38 a barrel, having slipped after rising to $85.95 earlier in the session.

While U.S. crude futures seesawed, Brent's steeper slide was attributed to news that Nexen Inc's Buzzard oil field in the North Sea came back on line Monday after a power outage briefly halted production at the weekend.

More pressure came from an unexpected fall in German analyst and investor sentiment in November as the euro zone's debt crisis drags on Europe's largest economy.

While the gloomy German sentiment reading helped push European shares lower, equities on Wall Street turned higher soon after the open as strong results from home-improvement giant Home Depot overshadowed concerns about U.S. tax increases and automatic spending cuts in January.

"The Buzzard resumption, weak German data and overall euro zone worries pressuring the euro have helped put more pressure on Brent," said John Kilduff, a partner at hedge fund Again Capital LLC.

Brent's premium to U.S. crude fell back below $23 a barrel on Tuesday after reaching $23.78 during the session, but not threatening Monday's $24.02 intraday peak. The spread hit a 12-month peak of $24.33 on Oct. 29, contracted to $20.10 on Nov. 5, before widening again. Prices around the U.S. oil future delivery hub of Cushing, Oklahoma, have been under pressure from a planned overhaul of the largest crude unit at the giant BP refinery in Whiting, Indiana.

The 337,000 barrel per day BP plant normally sources crude supplies from Cushing.

U.S. RBOB gasoline and heating oil futures also slipped. The U.S. Energy Department's decision to tap 100,000 barrels of strategic diesel reserves in the wake of Superstorm Sandy, announced late on Friday, saw heating oil prices fall for a second day, sliding by more than 4 cents a gallon to settle near $2.96 a gallon.

Brent and U.S. crude, gasoline and heating oil futures all sat below their 50-, 100- and 200-day moving averages, technical levels monitored by chart watchers.

Weekly U.S. oil stock data from the American Petroleum Institute (API) and the U.S. Energy Information Administration (EIA) has been delayed by one day to Wednesday and Thursday respectively after government offices were closed for the Veterans Day holiday on Monday.

Brent prices have stayed over $100 through most of this year despite a weakening demand outlook, touching a high of $128 in March, on worries of a disruption in supply from the Middle East as tension rose over Iran's disputed nuclear program.

Iran is carrying out its biggest ever air drills this week, Iran's English-language Press TV said, with about 8,000 elite and regular army troops carrying out maneuvers backed by bombers and fighter planes.

Tension also remained high on the Golan Heights, where Israeli gunners have retaliated against stray Syrian mortar fire landing on the occupied plateau in the previous two days.

(Additional reporting by Peg Mackey in London and Manash Goswami in Singapore; Editing by Marguerita Choy and Grant McCool)



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