Oil falls $2, below $122 on weaker demand fears

By @ibtimes on

Oil prices fell more than $2 a barrel on Monday to under $122 a barrel after OPEC ministers said high oil prices could place a major strain on consumer countries, and S&P revised its U.S. outlook to negative.

Leading OPEC member Saudi Arabia on Sunday confirmed it had cut output by more than 800,000 barrels per day (bpd) in March because of weak demand.

Saudi Oil Minister Ali al-Naimi said the economic recovery remained patchy, while his Kuwaiti counterpart added that high oil prices could form a significant economic burden for many import-dependent countries.

Brent crude was down $1.50 cents at $121.95 a barrel by 1350 GMT after earlier falling over $2 to an intraday low of $121.36. U.S. crude fell $1.95 to $107.71, having traded as low as $107.60 a barrel.

The oil market also took fright after ratings agency Standard & Poor's said it was revising the outlook for the credit-worthiness of the United States to negative from stable.

It said there is a risk policymakers may not reach agreement on how to address the country's long-term fiscal problems.

The market has been focused on demand destruction over the past week rather than the geopolitical risks in North Africa and the Middle East and this should go some way to cementing that view, said Paul Harris, head of natural resources risk management at Bank of Ireland in Dublin.

Oil prices fell early last week on concerns that demand is eroding under pressure from high prices, but rebounded on Friday following encouraging U.S. economic data.

In Libya, forces loyal to Muammar Gaddafi bombarded Misrata with rockets and artillery and pounded the insurgents' eastern frontline outpost of Ajdabiyah, rebels said.

The oil market is still seeking a close replacement for very high quality Libyan sweet crude oil lost due to the conflict in the North African nation, OPEC Secretary General Abdullah Al-Badri said on Monday.

Unrest continues in Syria and Yemen.

Markets are also focused on corporate earnings, looking for signs of a stuttering recovery. Citigroup reported a 32 percent fall in profit in the first quarter on weak revenues, putting oil under further pressure.

Eurozone consumer confidence figures for April, which should have come on Monday, have been delayed until April 19, the European Commission said.

(Additional reporting by Francis Kan in Singapore and Alex Lawler in London; editing by James Jukwey)

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