* Brent sheds 0.7 percent to fall below $112
* Investors shun commodities as Europe crisis stoke risk aversion
* Tropical Storm Nate makes landfall in central eastern Mexico
* Speculators cut net long crude positions on NYMEX, ICE
By Alejandro Barbajosa
SINGAPORE, Sept 12 (Reuters) - Oil fell by about $1 on Monday with a stronger dollar as investors shunned commodity risk because of Europe's deepening sovereign debt crisis, while economic gloom dampened the outlook for energy use.
Brent crude
Risk aversion erased about 3 percent of Brent's value in the previous two sessions on speculation Greece would default, while G7 finance ministers pledged a coordinated response on Friday to the global economic slowdown, but offered no specific steps and differed in emphasis on Europe's debt crisis.
"People are quite nervous about Greece and other countries in the European area, so that is why investors are escaping to the dollar," said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd. "It's risk aversion."
Greece on Sunday slapped a new tax on real estate to plug a 2011 budget hole, please international lenders and secure a key new loan tranche as concerns mounted in Europe over its euro zone membership.
Vague pledges and a lack of action by Group of Seven industrialised nations underscored differences between Europe and the United States and a lack of room to manoeuvre in the face of the worst loss of confidence since the credit crisis.
Concern about damage to U.S. Gulf oil infrastructure eased after Tropical Storm Nate made landfall in central eastern Mexico over the weekend, with no other major weather disturbances expected to affect the hydrocarbon-rich region in the short term.
Nate weakened to a tropical depression on Sunday as it moved farther inland, after cutting Mexican oil production by 178,800 barrels a day as of Friday. The Dos Bocas port re-opened to shipping on Sunday, but the crude-exporting hub of Cayo Arcas remained closed along with two other smaller ports.
Hedge funds and other large investors reduced their futures and options net long positions on the New York Mercantile Exchange by 5,780 contracts to 155,837 in the week to Sept. 6, the U.S. Commodity Futures Trading Commision said on Friday.
Oil markets were also eyeing production and exports of Libyan crude following the country's convulsed power transition. About 2 million barrels of very light crude oil have been offered via a tender, making it the largest volume to come to market since war erupted in February. (Reporting by Alejandro Barbajosa;Editing by Clarence Fernandez)