Brent crude slipped below USD 111 on concerns of demand growth after data from China, the second-biggest oil consumer, showed factory output slowed.
Worries about demand growth overshadowed concerns over supply disruptions in the Middle East with tensions escalating with Iran. They also pared earlier session gains after the world's major central banks took coordinated action to keep the euro zone crisis from worsening. Brent crude fell 9 cents to USD 110.44 by 0838 GMT after rising to as much as USD 111.24. US crude fell 5 cents to USD 100.28 per barrel.
Mr Tony Regan analyst at Tri Zen Capital in Singapore said that "The pressure on Brent is the weak economy in Europe. We are not sure if we are going to see significant growth in oil demand.
China's HSBC Purchasing Manager's Index fell to 32 month low in November at 47.7. The number suggested that Chinese factory activity had shrunk in the face of softening demand both at home and abroad.
Analysts said that Euro zone leaders have so far failed to restore confidence and some analysts now see a December 9th 2011 Brussels summit as a make or break moment for the euro. The euro zone's woes may have temporarily overshadowed the impact of Iran's escalating tensions with the West and the threat of further sanctions.
Diplomats said that Tuesday's attack on the British embassy in Tehran by dozens of students and protesters angry over Britain's unilateral sanctions could provide extra ammunition to European governments pushing for stronger sanctions against Iran, in particular a contentious embargo on Iranian oil.
Mr Jonathan Barratt MD at Commodity Broking Services in Sydney said that "You've got some pretty bullish news out there and Brent failed to rally on the back of it. What's the game? Every time when there's a problem in Iran, you don't see the prices coming off. They should go up 5% to 10%."
Apart from Iran, trouble was brewing in Sudan, which denied on Wednesday that it had halted landlocked neighbor South Sudan's oil exports in a transit fee row. But it said the country had confiscated crude shipments to make up for payments it claims South Sudan owes.
