Oil prices slipped below $98 a barrel Tuesday on worries about slowing economies in Europe, despite expectations that U.S. crude inventories are falling and demand could be increasing.
By early afternoon in Europe, benchmark crude for December delivery was down 52 cents at $97.62 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 85 cents to settle at $98.14 in New York on Monday.
In London, Brent crude was down 8 cents to $111.81 a barrel on the ICE Futures exchange.
Crude has surged about 30 percent from $75 on Oct. 4 amid growing investor optimism that the U.S. economy would avoid recession this year. Traders are now mulling whether weak economic growth will boost demand enough to justify further price gains.
In Europe, however, economic data seemed to point toward an approaching slowdown. While the economy of the 17-nation euro bloc grew by 0.2 percent in the third quarter, other indicators were less auspicious.
"The latest Eurostat figures for September are further cause for concern as they showed industrial production in the eurozone down by 2 percent month-on-month," said a report from JBC Energy in Vienna, citing a 2.9 percent fall on the month in Germany and a 4.8 percent retreat in Italy. "This is further evidence that Europe could be in for a recession."
Continued concerns about how new leaders in Greece and Italy will be able to manage their debts also affected investors.
"As it is clear that the debt problems in Italy and Greece will not disappear overnight because of a change of government, markets have switched back to 'risk-off' mode and commodity prices have come under pressure on a broad front," said analysts at Commerzbank in Frankfurt.
Falling crude inventories in the U.S. and Europe suggest supplies aren't keeping up with demand. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., predict crude and gasoline stocks both fell 1.5 million barrels last week.
The American Petroleum Institute reports its weekly supply figures later Tuesday and the Energy Department's Energy Information Administration announces its data — the market benchmark — on Wednesday.
"Unexpectedly resilient economic data has exacerbated the tightness in physical commodities," Goldman Sachs said in a report. "We maintain our view that global growth will provide enough support to demand to drive key commodity prices higher over the next 12 months."
Goldman recommended investors buy the December 2012 crude futures contract.
In other Nymex trading, heating oil added 2.25 cents to $3.1847 per gallon and gasoline futures rose 2.16 cents to $2.5569 per gallon. Natural gas fell 4 cents to $3.418 per 1,000 cubic feet.