U.S. Crude Down Slightly as Supply Concerns Reignite

Brent crude oil held near $111 a barrel on Monday as violent protests in Egypt raised new worries over the stability of the Middle East, reigniting supply concerns.

Hopes Greece could avoid bankruptcy also brightened the outlook for oil demand from Europe as euro zone finance ministers met to try to hammer out a deal to get lenders to release emergency aid to Athens before its next debt repayments.

Brent crude slipped 33 cents to $111.05 a barrel by 1300 GMT, consolidating recent gains. Brent is up around 2 percent so far this month. U.S. crude oil futures fell 40 cents to $87.88.

Supply worries remained uppermost in the minds of many investors, traders said, as political crisis deepened in Egypt over an expansion of the powers of President Mohamed Mursi.

Mursi was due to meet senior judges on Monday to try to ease the dispute that has set off violent protests reminiscent of last year's revolution, which brought him to power.

Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, said investors were right to be concerned by what was happening in Cairo because Egypt was such a pivotal power in the Middle East and North Africa.

"If it is getting messy there, it could spill over into other countries - oil producers in North Africa and even into the Gulf and even countries like Saudi Arabia," Fritsch said.

"The whole of the Middle East is a mess and it seems that, just as one fire is extinguished, another one breaks out."


The euro strengthened, taking heart from signs that euro zone ministers could thrash out a deal to allow emergency loans to Greece.

Euro zone finance ministers and the International Monetary Fund were meeting on Monday to try to unfreeze the second bailout package for Greece.

German Chancellor Angela Merkel said she was confident a deal could be reached, while the French finance minister said an agreement was close.

Investors also kept an eye on Washington, where the White House and Congress are set to resume budget talks this week.

They want to avoid a series of automatic tax hikes and spending cuts worth $600 billion set for January, which some fear could tip the world's biggest oil consumer into recession.

Lawmakers in both the Democratic and Republican parties have been trying to convince the public - and financial markets - that they are willing to compromise and can reach a deal before the end of the year.