Oil prices lower on Europe debt worries

Posted at 01/23/2012 1:14 PM

SINGAPORE - Oil prices were lower in Asian trade Monday amid renewed concerns over Europe's ability to deal with its towering debt crisis, analysts said.

New York's main contract, West Texas Intermediate crude for delivery in March, was down 22 cents to $98.11 a barrel in morning trade.

Brent North Sea crude for March delivery shed three cents to $109.83.

"There is still great worry over whether Greece will be able to deal with its huge debt problem... which may soften demand for crude," said Ken Hasegawa, energy desk manager at Newedge brokerage in Tokyo.

European Union finance ministers are set to meet in Brussels on Monday to forge ahead with plans to implement a fiscal pact and finalize a treaty setting up a permanent debt rescue fund.

The ministers will also decide on the terms of a second bailout for Greece -- the epicenter of the eurozone's debt crisis -- after private creditors refused to write down the country's debt any further over the weekend.

Traders meanwhile will be closely watching the situation in the Middle East as the EU readied itself to slap an embargo on Iran's oil exports.

EU foreign ministers are meeting Monday to strengthen existing sanctions on Tehran by banning imports on Iranian crude as well as targeting finance, petrochemicals and gold.

The ministers will also discuss seeking new suppliers able to match the easy conditions offered by Tehran to Greece, which imports over a third of its crude oil from Iran.

Contacts are underway with Saudi Arabia and hopes are high that Libya can soon increase its production.

The new EU sanctions are part of a concerted effort with the United States to pressure Iran into halting its controversial nuclear activities, which the West suspects are aimed at developing nuclear weapons.

Iran says its nuclear program is purely for civilian use.

The EU ministerial meeting comes hard on the heels of a Pentagon announcement that the US aircraft carrier USS Abraham Lincoln on Sunday passed through the Strait of Hormuz and is now in the Gulf, after Tehran threatened to close the strategic shipping route.