--Economic headwinds pressure crude lower, but geopolitical concerns put a floor under prices --Investors eye Merkel and Sarkozy meeting on euro zone --Weakening term structure indicates underlying support diminishing By Sarah Kent Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Crude prices were weaker Monday, as ongoing concerns about the euro zone economy pressured prices lower while supply risks continued to underpin their overall strength. Investors were cautious ahead of a meeting between German Chancellor Angela Merkel and French President Nicholas Sarkozy, in which the two leaders will discuss plans to revive economic growth in the euro zone. At 1108 GMT, the front-month February Brent contract on London's ICE futures exchange was 9 cents lower at $112.97 a barrel. The front-month February contract on the New York Mercantile Exchange was trading down 46 cents, or 0.5%, at $101.10 per barrel. The war of words between Iran and the West continued to support prices, with U.S. Defense Secretary Leon Panetta saying Sunday that Iran would cross a "red line" if it closed the Straits of Hormuz, a key oil transport route. "In view of the ongoing escalation of the Iran crisis, the oil price remains well supported, which may lead to a further rise in net long positions and an additional increase in prices," said Commerzbank in a note. A general strike in Nigeria, which could hamper oil shipments from Africa's largest producer also lent support, though so far the strike has not affected the country's exports. However, concerns about the state of the euro zone's economy were providing negative undercurrents to the market, analysts said. "Two things that are holding oil prices back are the strength of the dollar and the general weakness in the euro zone," said Christopher Bellew, energy broker at Jefferies Bache Ltd. Unseasonably warm weather has also contributed to weak demand, he added. While prices remained strong, the price difference between future months narrowed suggesting that while geopolitical concerns continued to command a premium, the underlying market fundamentals have weakened. In the last week the premium the February Brent contract commanded over the March contract narrowed to 19 cents from 60 cents. "The deterioration in fundamentals should accelerate as we move into seasonally weaker demand in the months ahead with high prices likely to exacerbate the expected weaker 1H trends," said Morgan Stanley in a note. "Any price surge on supply fears likely represents a selling opportunity, in our view," it added. At 1109 GMT, the ICE's gasoil contract for February delivery was up $3.75, or 0.4%, at $964.50 per metric ton, while Nymex gasoline for February delivery was 22 points higher at $2.7538 per gallon. -By Sarah Kent, Dow Jones Newswires; 4420-7842-9376; sarah.kent@dowjones.com

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