Oil slips on Greece worry, strong supply

Brent crude oil slipped below $112 on Wednesday, on track for its longest losing streak in nearly two years, as political turmoil in the debt-laden eurozone deepened worries about prospects for fuel demand.

Rising oil stocks in the United States, and increased production from Saudi Arabia at a time of economic gloom have also helped push oil down from levels near $126 per barrel in April.

“The weakness in oil was the result of higher Saudi production and concerns for the U.S. economy and a slow-down in China,» said Christopher Bellew at Jefferies Bache.

Brent crude was down 82 cents to $111.91 a barrel by 1121 GMT, dropping for a sixth straight session, its longest losing streak since the middle of 2010. Brent settled at $112.73 on Tuesday, the lowest close since since Feb. 2. U.S. crude was at $96.18, down 83 cents.

This week’s fall has been largely caused by renewed uncertainty about the future of the eurozone.

In Greece, a highly fractured parliament struggled to cobble together a coalition, with the Leftist candidate for prime minister opposing a bailout deal crucial to the economy.

This stoked fears about whether the eurozone would be able to pull itself out of a debt crisis, weighing on equities and commodities across the board.

Leadership changes in France and Greece fanned worries that the political uncertainty could threaten austerity plans seen by some as key to tackling the eurozone debt crisis.

Adding to the negative tone to global economic news, British retail sales fell at their fastest rate in more than a year in April and jobs growth slowed, nudging the economy closer to a third quarter of contraction.

However, while data from major global economies has been disappointing recently, Bellew highlighted data from Germany on Wednesday showing exports and imports both rose to record monthly levels in March.

“It seems to me as if Brent will hold above $110 per barrel, and maybe rally to the $116 area if the speculators come back into the market.”

Higher OPEC production and rising crude stockpiles globally also weighed on oil prices.

Investors are now eyeing U.S. government data later in the day to confirm industry statistics that showed a larger-than-expected rise in crude inventories, already at their highest level since 1990.

In the United States, the world’s largest oil consumer, domestic crude stocks jumped 7.8 million barrels in the week to May 4, according to industry group American Petroleum Institute. This is nearly four times the forecast in a Reuters poll of analysts.

“The total crude stocks already sit about 3 percent below all-time highs, so another build over 1.2 million barrels will likely be particularly bearish for prices,» ANZ analysts said in a note.

Saudi Oil Minister Ali al-Naimi reiterated on Wednesday that there was a surplus of oil in the market, following his earlier comments that the world’s top exporter is pumping around 10 million barrels per day and is storing 80 million barrels to meet any sudden disruption in supplies.

“In light of the current economic environment, it appears that the Kingdom is still concerned that high oil prices will eat into demand and could dampen any economic recovery,» JBC Energy said in a note to clients.

Higher production from Saudi Arabia has partly filled a supply gap caused by lower imports from sanctions-hit Iran. India has joined other Iranian crude buyers in Asia to cut back imports from the Islamic Republic.