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UPDATE 1-Oil down more than $1 as Greece, US econ outlook weighs

Published 06/20/2011, 02:18 AM

* Brent slides as low as $111.84; U.S. oil dips to $91.42

* Futures dip on fears of a contagion of Greece crisis -analyst

* Fall in prices to offer opportunities to buy -analyst

* Brent to rebound to $115/bbl -technicals (Adds comments, updates prices)

By Manash Goswami

SINGAPORE, June 20 (Reuters) - Brent crude fell more than $1 on Monday, extending last week's losses, as concern over a debt crisis in Greece and a weaker economic outlook for the world's top oil consumer, the United States, weighed on prices.

Brent crude slipped $1.24 a barrel to $111.97 a barrel, while U.S. oil declined $1.25 a barrel to $91.76 a barrel by 0647 GMT.

Euro zone finance ministers postponed a final decision on extending 12 billion euros ($17 billion) in emergency loans to Greece, saying Athens would first have to introduce harsh austerity measures, pushing the euro lower.

The dollar index gained 0.5 percent against a basket of currencies, weighing on oil prices.

"There is full-fledged fear of this Greece crisis falling apart," said Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp. "At the end of the day, they will get a bailout, but there is fear of a contagion, a mini crisis not very long after the Lehman collapse."

The euro zone ministers said they expected the money, the next tranche in a 110-billion euro bailout of Greece by the European Union and the International Monetary Fund, to be paid by mid-July. Greece has said it needs the loans by then to avoid defaulting on its debt.

On Friday, Brent settled at $113.21 a barrel, its lowest level since May 24, falling 4.7 percent in its biggest weekly loss since the week to May 6. U.S. crude futures settled at $93.01 a barrel, down 2.04 percent, their lowest since Feb. 18. U.S. crude fell below the key 200-day moving average for the first time since September, drawing additional selling.

Mitsubishi's Nunan also attributed the fall in part to higher supplies by top oil exporter Saudi Arabia after OPEC talks collapsed earlier this month.

"If they are increasing supplies to Asia, they must have done so for Europe as well," Nunan said.

PRICE OUTLOOK

Still, oil is unlikely to dip further because supply side concerns remain alive as unrest in the Middle East and North Africa continues, and the current slump will offer a buying opportunity, Victor Shum, an analyst at Purvin & Gertz, said.

"Two factors have contributed to the collapse in oil futures -- Greece and the U.S. economic outlook," Shum said. "But the pull-back in prices is temporary because the Greece crisis will pass and supply side concerns remain."

Shum expects U.S. crude to rebound to $95 a barrel this week and stay around $100 in the next few months with "extreme volatility around that level."

"Greece remains in the headlines," Shum said. "But the Euro zone will get together and will not allow Greece to default."

Brent is expected to rebound to $115 per barrel, as it failed to break below a support at $110.78, U.S. oil has been oversold and is expected to rebound to $95 per barrel, according to Reuters technical analyst Wang Tao.

Adding to concerns of an unstable euro zone was a cut by the International Monetary Fund in its estimate of U.S. gross domestic product growth. The IMF now projects an anaemic 2.5 percent growth this year and 2.7 percent in 2012. Just two months ago, it had expected growth of 2.8 percent and 2.9 percent, respectively.

SUPPLY CONCERNS

Against the backdrop of the uncertain growth outlook, continuing social unrest in Libya, Syria and other countries in the Middle East is helping to keep a floor under oil prices.

Syrian President Bashar al-Assad is to address the nation on Monday as his forces sweep through the northwestern border region with Turkey blocking refugees fleeing a military crackdown on protests against his autocratic rule.

The operation along the border follows the biggest protests on Friday during four months of anti-Assad unrest that a violent clampdown has failed to quash. Security forces shot dead up to 19 protesters on Friday, rights groups said.

"There have been reports that half of Yemen's output capacity is currently inoperable due to pipeline attacks," analysts led by Peter Jolly at National Australia Bank said in a report. "In themselves, these shutdowns have a minimal influence on the world oil market, but they compound the falls in Libyan production since the start of the year."

NATO has been pounding targets in Libya for months in what it says is an operation to protect civilians who rebelled against Gaddafi's 41-year rule. The Libyan leader says it is an act of colonial aggression designed to steal oil. (Editing by Clarence Fernandez, Himani Sarkar)

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