June 5, 2012 / 4:17 AM / 6 years ago

UPDATE 2-Brent crude falls below $99 on Spain worries

* Treasury minister says markets closed to Spain

* G7 to hold emergency talks on euro debt crisis (Adds Spain worries, fresh Shell CEO quote, updates prices)

By Randy Fabi

SINGAPORE, June 5 (Reuters) - Brent crude prices fell below $99 a barrel on Tuesday, reversing gains earlier in the session, as a darkening outlook on the euro zone debt crisis sparked concerns over oil demand growth.

Brent crude for July delivery dipped 18 cents to $98.67 a barrel by 0756 GMT, after rising nearly a dollar earlier in the session. Prices on Monday briefly hit a 16-month low of $95.63 before recovering and closing higher.

U.S. crude rose 33 cents to $84.31 a barrel.

Oil prices erased its gains after Spain’s treasury minister said financial markets were shut to the country at current borrowing rates. Spain will test the market on Thursday with an auction of 1-2 billion euros of medium-term and long-term bonds.

“Global demand is softening, we have got recessionary elements in Europe, a small slowdown in Asia Pacific,” Royal Dutch Shell CEO Peter Voser told Reuters on the sidelines of an industry conference in Kuala Lumpur.

“At the same time, some of the geopolitical elements of price volatility over the past few months have kind of receded, and therefore we see a softening of prices which I expect to go well into the second half of this year.”

Ministers and central bankers from the United States, Canada, Japan, Britain, Germany, France and Italy will discuss the euro zone debt crisis later on Tuesday, in a sign of heightened global alarm about the strains in the 17-nation European currency area.

The euro reversed early gains against the dollar and Bund futures rose on Tuesday following comments by Spain’s treasury minister.

ECONOMIC JITTERS

The darkening outlook over the world economy and its potential impact on global crude demand has taken the spotlight from lingering tensions between Iran and Western powers, which just three months ago helped push Brent to above $128.

The United Nations nuclear watchdog and Iran will hold a new round of talks on Friday to try to reach an agreement to resume a long-stalled probe into Tehran’s atomic activities, the head of the IAEA said on Monday.

Traders will also be awaiting the release of this week’s U.S. crude stocks data.

Crude inventories in the world’s top oil consumer likely fell last week after 10 straight weeks of builds, due to lower imports, a preliminary Reuters poll showed ahead of weekly industry and government reports.

Inventory data from the American Petroleum Institute is due on Tuesday at 2030 GMT, while the U.S. Energy Information Administration’s weekly poll comes out at 1430 GMT on Wednesday. (Additional reporting by Florence Tan and Simon Webb in Kuala Lumpur; Editing by Himani Sarkar)

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