london 06 27, 2012, 15:00 IST
Brent crude oil fell on Wednesday on mounting concerns that European leaders would fail to solve the region's intractable debt crisis at a key meeting this week, offsetting tighter North Sea oil supply.
Brent crude had fallen $1.13 to $91.89 per barrel by 0833 GMT. U.S. crude was down 59 cents at $78.77.
The closure of oil platforms in the North Sea due to an oil strike in Norway saw a sharp spike in the price of Brent crude on Tuesday.
Norway does not plan to intervene to halt the strike and may change its stance should the strike escalate, labour minister Hanne Bjurstroem said on Wednesday.
But low expectations for a bold move from a Thursday summit of European leaders to halt contagion from the 30-month long debt crisis once again switched the focus from supply back to a weak demand outlook.
German Chancellor Angela Merkel snuffed out the idea of common euro zone bonds, which are favoured by France, Italy and Spain, saying that Europe would not share total debt liability "as long as I live".
"The global supply and demand, or macro concerns on Europe have not really changed, hence it might be difficult to carry on the move of yesterday in crude oil," said Olivier Jakob at Petromatrix in Zug, Switzerland.
Brent on Tuesday posted its largest daily percentage gain since March 1, settling above $93 for the first time in a week after Norway's Statoil ASA
This will reduce output at the world's eighth-largest oil producer by 150,000 barrels per day.
Brent's price jump stretched its premium over West Texas Intermediate (WTI) prices to more than $13 on Tuesday, the widest in more than a week.
Investors, who are closely watching for clues on the supply-demand dynamic, were awaiting U.S. inventory data from the Energy Information Administration.
U.S. crude stockpiles were forecast to have fallen by 500,000 barrels last week because of a drop in imports, an extended Reuters poll of analysts found, ahead of to be released at 1430 GMT.
But data from the American Petroleum Institute (API) late on Tuesday showed an unexpected rise of 507,000 barrels last week.
Oil is on track to drop more than 20 percent in the second quarter, the largest three-month fall since the financial crisis in 2008, due to demand concerns triggered by economic worries.
"At current levels, oil is trading almost exactly at fair value," Credit Suisse analysts said in a monthly report.
"The geopolitical risk premium due to a potential escalation of the situation surrounding the Iranian nuclear programme now seems to be priced out completely. Whether this is justified is arguable."
U.S. and EU sanctions on Iranian crude would start this week, but the impact was expected to be marginal as higher output from OPEC helped fill the shortfall, Creed said.
Iran on Tuesday urged the European Union to reconsider an embargo on Iranian oil that comes into effect on July 1, saying that it wanted engagement and not confrontation with the bloc.
Geopolitical tensions rose in the Middle East after NATO allies condemned Syria for shooting down a Turkish military plane.
