Eurozone turmoil weighs on Brent crude as barrel price slips

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Brent crude oil slipped to around $114 a barrel yesterday on worries over economic growth and ahead of a European Central Bank (ECB) meeting expected to announce new measures to tackle the region’s debt crisis.

ECB President Mario Draghi is expected to back up his pledge to do “whatever it takes” to save the euro when he presents details today of a new bond-buying plan designed to ease the deepening eurozone crisis.

Investors also awaited US jobs data tomorrow for clues on the health of the world’s biggest economy.

A soft jobs report could strengthen the case for a third round of monetary easing (QE3) from the Federal Reserve when it next meets this month.

Since late 2008, the Federal Reserve has bought $2.3 trillion in long-term securities in a drive to spur growth, indirectly pumping billions into assets markets and injecting huge liquidity into oil and commodities and boosting prices.

Brent crude futures for October fell 20 cents to $113.98 a barrel. US crude futures slid 40 cents to $94.90.

“The market hopes the ECB will do something special to solve the eurozone’s problems,” said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt.

Worries about economic growth moved centre stage after data showed that US manufacturing shrank at its sharpest clip in more than three years last month, while separate releases showed exports and hiring in the sector also slumped.

The next big test for the US economy will be the August unemployment data. The median forecast in a Reuters poll is for a gain of 120,000 jobs, down from 163,000 in July.

The data is crucial as Federal Reserve Chairman Ben Bernanke in a speech at a Fed symposium last week said the weak job market and 8.3 per cent unemployment was a “grave concern”.

Investors were paring expectations from the ECB’s meeting, after driving markets higher on hopes it will detail a bond-buying plan to help out its crisis-ridden members.

Germany’s Constitutional Court will rule on September 12 whether the eurozone’s bailout fund is compatible with German law, and the ECB may not be able to do anything significant until then.