Oil dips on euro zone woe, slow global growth

Friday, 19 August 2011 00:01 - - {{hitsCtrl.values.hits}}

LONDON (Reuters) - Oil dipped on Thursday as investors tried to lock in profit from their highest levels in about two weeks, with worries about euro zone debt problems and slower global growth outlook pressing on prices.

Brent crude futures fell 68 cents, or 0.6 percent, to $109.92 a barrel by 4:40 a.m. EDT, after hitting the highest closing price since August 3 on Wednesday. U.S. crude was down 71 cents at $86.87.

Trading volumes of both contracts were moderate.

"Confidence is extremely fragile," said Mark Thomas, head of Europe, energy, with brokerage Marex Financial.

"It is only a matter of time before inherent euro conflicts come to the fore again and that will put on pressure again, apart from (on) gold."

Gold was edging higher, while European shares fell from a week high hit on Wednesday. Asian stocks were sold off.

Adding to the glum growth picture, Morgan Stanley cut its forecast for global growth, citing "recent policy errors" in the United States and Europe, plus prospects of further fiscal tightening in 2012.

The bank also said the global economy is "dangerously close to a recession.

Oil was also depressed by a stronger dollar, which rose as much as 0.4 percent against a basket of currencies on Thursday, making dollar-denominated assets more expensive when purchased in other currencies.

The Swiss franc fell against the euro and the dollar with traders saying the Swiss National Bank was intervening in the forwards market in its bid to curb the currency's strength.

The plight of the Swiss franc is part of a larger battle over Europe's fiscal crisis, with the Swiss currency a beneficiary of investors seeking safety in a currency other than the euro.

Still, the dollar would remain under pressure and could hit record lows against the Swiss franc in days ahead as long as the U.S. economic recovery stays tenuous, analysts said.

Data due later in the day, including U.S. initial jobless claims, existing home sales and regional manufacturing, will be closely watched.

The market is also watching the situation in Libya, where rebels to the west and east of the capital fought forces loyal to Muammar Gaddafi for control of oil facilities vital to winning the six-month-old civil war.

Oil prices have been supported by the loss of around 1.6 million barrels per day of production in Libya since the start of an uprising against Gaddafi's rule in February.