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 U.S. and EU central banks.
"It is 'Risk Off' today," said Olivier Jakob, energy analyst at Petromatrix in Zug, Switzerland. "The Greek strike and Spanish demonstrations are getting a lot of coverage."
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 U.S. 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.
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.
U.S. President Barack Obama on Tuesday told the UN General Assembly the country would do what it must to prevent Iran from obtaining a nuclear weapon -- the latest in a series of exchanges over Iran's disputed nuclear programme.
The United States and Europe have imposed sanctions on Iran's oil shipments to register their opposition to its nuclear research, which the Middle Eastern nation insists is for peaceful purposes.
Iranian President Mahmoud Ahmadinejad this week stepped up rhetoric against Israel, which has hinted it could strike Iran's nuclear sites. Iran Press TV this week said the Islamic Republic successfully tested an anti-aircraft system.
Investors awaited oil inventory data from the U.S. Energy Information Administration (EIA) at 10:30 a.m. EDT (1430 GMT), for evidence of U.S. fuel consumption.
The American Petroleum Institute said on Tuesday U.S. crude stocks rose slightly last week while distillate stockpiles had an unexpected draw. A Reuters poll of analysts forecast the EIA would confirm the higher trend for crude inventories. (Additional reporting by Ramya Venugopal in Singapore; Editing by Alison Birrane)