Oil slips as Europe, Greece fan demand worries

Oil prices weakened on Tuesday for a fifth day running as Greece's post-election uncertainty added to signs of economic slowdown on both sides of the Atlantic and fanned concerns about weakening demand for petroleum as supply increases.

But crude futures, the euro and U.S. stocks all pared losses after initially dropping sharply on news that Left Coalition leader Alexis Tsipras will not cooperate with Greece's two main parties unless they renege on pledges made to abide by a bailout deal made with the European Union and the International Monetary Fund.

"Failure to take out Monday's lows caused the shorts that had piled in the market to turn," said Gene McGillian, analyst, Tradition Energy in Stamford, Connecticut.

Tuesday's pared losses still left Brent down 5.79 percent over five sessions, with U.S. crude off 8.62 percent, the biggest five-day percentage losses since October.

Oil prices also felt pressure early after Saudi Arabian Oil Minister Ali al-Naimi said the kingdom's output was around 10 million barrels per day (bpd) and that the world's top exporter was storing 80 million barrels in case of any disruption in supplies.

Brent June crude eased 43 cents to settle at $112.73 a barrel, having fallen to $110.53, finding support above Monday's $110.34 intraday low.

U.S. June crude fell 93 cents to settle at $97.01. It slumped as low as $95.52, also finding support above Monday's 2012 low at $95.34.

The Brent/U.S. crude spread <CL-LCO1=R> widened, also in choppy trading, with Brent's premium to its U.S. counterpart ending at $15.72 a barrel based on settlements, but only after swinging from $14.78 to $15.87 intraday.

Total crude trading volume surpassed 600,000 lots and topped 30-day averages by 10 percent for both Brent and U.S. crude.

U.S. gasoline and heating oil futures rallied to post higher settlements, despite continuing signs of weak consumer demand.

U.S. gasoline demand fell 0.7 percent in the week to May 4 versus the previous week and was down 5.8 percent from the year-ago period, MasterCard said in a report.

Europe's elections last weekend prompted a sharp sell-off early on Monday as France's choice of a new leader and Greece's inability to form a new government shook an already fragile outlook for the debt-laden region.

"As Europe's political, financial and social cohesion crumbles, it will have the attendant effect on demand," said Michael Fitzpatrick, editor of industry newsletter Energy Overview in New York.

Friday's disappointing U.S. jobs data had already stoked concerns about growth in the world's largest economy.

EUROPE TURMOIL HITS ACROSS MARKETS

The political uncertainty in Greece sent the euro lower against the dollar for a seventh straight session, making oil costlier for European buyers. On Wall Street, all three major U.S. stock indexes fell more than 1 percent.

Copper fell to a two-week low as Greece's travails drew attention to the possible threat to demand outlooks for industrial materials, beyond oil.

U.S. Treasury debt prices rose, pushing benchmark yields to three-month lows, as Greece's post-election uncertainty stoked safe-haven buying of U.S. government debt.

U.S. OIL INVENTORIES

Crude oil stocks in the United States, already at their highest since 1990, are expected to have risen a seventh straight week, as supply in Cushing, Oklahoma, builds ahead of a reversal of a key pipeline connecting the Midwest and the refinery-rich Gulf Coast, a Reuters poll showed.

Inventory data from the American Petroleum Institute (API) is due on Tuesday at 4:30 p.m. EDT (2030 GMT), followed by the U.S. Energy Information's (EIA) weekly report on Wednesday.

The EIA raised slightly its 2012 world demand growth forecast by 70,000 bpd, in a monthly report on Tuesday, but cut its 2013 estimate by 140,000 bpd. (Additional reporting by Gene Ramos in New York, Christopher Johnson in London and Florence Tan in Singapore; editing by David Gregorio and Alden Bentley)

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