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Oil falls below $110 on euro zone crisis

LONDON - Brent crude oil fell more than $1 per barrel to below $110 on Wednesday, weighed down by a stronger dollar, worries over growth and the euro zone debt crisis as Greece faced its biggest anti-austerity strike for months.

Greece’s transport system ground to a halt, shops pulled down their shutters and hospitals worked on emergency staff on Wednesday as the country’s two biggest unions protested against a new round of belt-tightening.

The strike followed violent protests in Spain, reigniting worries that the euro zone debt crisis is deepening despite efforts by central banks to reflate their economies.

A stronger dollar and a weaker euro also depressed oil after the Bank of Spain said Spain’s gross domestic product fell at a “significant rate” in the third quarter.

North Sea Brent crude oil futures fell $1.04 to a low of $109.41 before recovering to trade around $109.60 by 0850 GMT. U.S. light crude oil futures also fell sharply, dropping to an intra-day low of $90.33, down $1.04.

Crude futures surrendered gains made earlier this month when both contracts reached four-month highs on a commodity-wide rally fed by stimulus measures by US and EU central banks.

The euro fell to a two-week low against the dollar on Wednesday. Oil tends to move inversely to the dollar as many commodities are priced in the US currency.

Stock markets fell on Wednesday with investors expressing concern over the deep euro crisis, the pace of economic growth and its effect on demand. The U.S. economy grew 1.7 percent annually in the second quarter, and economists say it is unlikely to fare much better in the current quarter.

Several large U.S. companies have cut earnings forecasts this week. Caterpillar, FedEx Corp and Norfolk Southern all cut its profit estimates, citing sluggish demand.

Iran

Protesters clashed with police in the Spanish capital on Tuesday as the government prepared a new round of austerity measures for the 2013 budget to be announced on Thursday.

Spain is at the centre of the euro zone debt crisis over concerns the government cannot control its finances and those of highly indebted regions, bitten by a second recession since 2009, which has put one in four workers out of a job.

Investors also remain preoccupied with slow demand in China, the world’s second-biggest oil consumer, as smaller firms, the key driver of economic growth and job creation, are starved for cash as banks still favour large, state-backed companies.

Despite Wednesday’s drop, oil was supported by tension between Iran and the West and by worries over possible risks to Middle East supply if hostilities break out in the region.

Investors awaited oil inventory data from the US Energy Information Administration (EIA) at 10:30 a.m. EDT (1430 GMT), for evidence of US fuel consumption.

The American Petroleum Institute said on Tuesday US crude stocks rose slightly last week while distillate stockpiles had an unexpected draw.