Oil prices slide on fresh demand worries
Oil prices slumped on Monday, hit by the prospect of weaker European and Chinese demand for energy while the market waited to see if a new volcanic ash cloud would hit sales of jet fuel.
New York's main contract, light sweet crude for delivery in July, shed $2.30 to $97.80 a barrel.
Brent North Sea crude for July sank $2.70 to $109.69 in late London trade. It earlier fell to $108.58, a loss of almost four dollars.
"Continued and growing concerns for the European debt situation as well as disappointing China (manufacturing data) ... are the main driver" for prices at the start of the week, said Bjarne Schieldrop, a senior commodities analyst at Swedish financial group SEB.
Chinese manufacturing eased to a 10-month low in May, preliminary HSBC data showed on Monday, fuelling fears of a slowdown in the world's number two economy. China is the world's biggest consumer of energy.
Elsewhere on Monday, the dollar firmed against the euro after Greece's credit rating was slashed, renewing fears over the eurozone debt crisis.
Fitch Ratings on Friday lowered Greece's credit ratings by three notches, citing its growing problems in getting its public finances in order.
A stronger US unit makes dollar-denominated oil more expensive for holders of other currencies, impacting demand.
Demand for jet fuel could also be hit after ash from an Icelandic volcano threatened to shut European airspace. The Grimsvoetn volcano began erupting late on Saturday and its ash cloud was heading towards Britain and France.
It follows the eruption in April 2010 of Iceland's Eyjafjoell volcano when ash caused the planet's biggest airspace shutdown since World War II with more than 100,000 flights cancelled and eight million passengers stranded.
The market was also beginning to look ahead to next month's meeting of the Organisation of Petroleum Exporting Countries when the cartel must decide on whether to change its oil production levels.
"OPEC oil ministers are due to meet in Vienna on the 8th of June, their first gathering for half a year, as pressure builds on them to increase production," the Centre for Global Energy Studies said in a monthly report.
OPEC "is struggling to find a way to deal with the current market situation that saw oil prices climb steadily to the end of April, before falling by 13 percent during the first week of May, as fears over future demand growth came to the fore," the London-based research group said in its May study.
CGES added that OPEC, whose member countries collectively produce 40 percent of the world's crude, "have failed to respond to the loss" of oil exports from Libya.
Europe stepped up pressure against Moamer Kadhafi on Monday, widening sanctions on his regime and offering further support to Libyan insurgents based in the rebel capital of Benghazi.
© 2011 AFP