Brent crude steadied around US$107 per barrel on Tuesday as investors weighed potential Middle East supply disruptions against a deepening debt crisis in the euro zone that is clouding the outlook for global fuel demand.
Spain's plan to use public debt to revive one of its troubled banks has raised worries that it could recapitalise other weak lenders at a time when borrowing costs are already surging.
"Markets are concerned because of the government's decision to bail out Bankia SA. This raises questions over Spain's ability to service it own debt," said Michael Creed, an economist at National Australia Bank. "The focus has never been just about Greece, but on countries like Spain and the risks of a contagion, and now with bond yields at dangerously high levels we are going to see markets on edge again."
Brent crude for July delivery eased 8 cents to US$107.03 per barrel by 0153 GMT, after hitting a high of US$108.04 in the previous session.
US crude oil futures gained 33 cents to US$91.19.
Supporting crude prices is the continuing threat of war breaking out in the Middle East and disrupting global oil supplies. Tensions between major oil producer Iran and the West remain high after inconclusive discussions last week on Tehran's nuclear programme.
Iranian officials have so far refused to grant access to a complex at the centre of Western suspicions that Tehran is developing nuclear weapons capability, despite Iran's repeated denials of any such ambition.
A report from the International Atomic Energy Agency last week said satellite images showed "extensive activities" at Parchin.
"Iran is back on the radar. We are not going to see any move to lift sanctions anytime soon, geo-political risk will continue to be the underlying support for prices," Creed said.
Six world powers failed to convince Iran last week to halt its most sensitive nuclear work, but they will meet again in Moscow next month to try to end a stand-off that has raised fears of a new war that could threaten global oil supplies.
From Arabian Business