Oil prices lower over eurozone debt worries

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Oil prices fell on Monday with the demand outlook uncertain as the market awaited the outcome of a European Union summit on containing the eurozone debt crisis, analysts said.

New York's main contract, West Texas Intermediate crude for delivery in March, shed 40 cents to USD 99.16 a barrel. Brent North Sea crude for March dropped 47 cents to USD 110.99 in late London deals.

"The main factor affecting oil prices right now has to be the debt situation in Europe and the outcome of today's summit in Brussels," said Purvin and Gertz energy consultant Victor Shum.

EU leaders were meeting in Brussels today to finalise details on a fiscal pact to reign in budget deficits and to endorse a permanent bailout fund with a lending capacity of 500 billion euros (USD 650 billion). The summit comes as Greece - the epicentre of the eurozone's debt crisis - inches towards striking an agreement with private creditors to erase 100 billion euros of its debt and implementing a new recovery plan put forward by the International Monetary Fund and the EU.

The eurozone and the IMF are demanding this commitment, even asking for it in writing as a precondition for a second 130 billion euro rescue package. Analysts said the situation in the Middle East also continues to be a factor influencing oil prices.

Officials from the UN atomic watchdog, the International Atomic Energy Agency, visited Iran yesterday to discuss Tehran's suspected nuclear weapons drive.

The visit is regarded as a rare opportunity to alleviate a building international showdown over Iran's nuclear programme marked by a ratcheting up of sanctions and talk of possible Israeli military action.

"The outcome of the IAEA inspection in Iran will also be a major factor affecting oil prices in the coming days," said Shum.

The EU last week imposed fresh sanctions on Iranian oil as part of a concerted effort with the United States to pressure Tehran into halting its controversial nuclear activities, which are suspected to be aimed at developing nuclear weapons.