Oil prices slid with world shares and the euro on Wednesday as investors fled from riskier assets, while a surprise build in US crude inventories helped send the WTI benchmark to a more than six-month low.
The possibility a political crisis in Greece may force the country's exit from the euro zone and send the region into deeper financial turmoil is fanning concerns about a slowdown in global demand for oil.
"One element contributing to the decline in oil prices is general investor risk aversion stemming from euro zone concerns and an increased risk of a general economic slowdown," said Gareth Lewis-Davies, a senior energy strategist at BNP Paribas.
It has also helped send the euro to a four-month low against the dollar, another factor weighing on oil prices on Wednesday.
"Another is the strength of the dollar flight to safety. As you know, there is an inverse relationship between the dollar and the price of oil," he said.
Brent crude was down $1.09 at $111.15 a barrel at 0827 GMT. US oil was down $1.44 to $92.54 a barrel, up from an earlier low of $91.81 a barrel, the lowest since November 3.
US stocks build
Overnight, an unexpected build in US crude oil stocks added to an already ample supply outlook. Inventories rose nearly four times more than expected, data from the American Petroleum Institute (API) showed.
Weekly data from the US Energy Information Administration is due at 1430 GMT.
Decreasing tension between the West and Iran is also easing pressure on oil prices. Talks between Iran and the nuclear watchdog ended on Tuesday with an agreement to meet again next week, when Iran also is due to resume talks with world powers over its disputed nuclear program.
The impact of a ban on Iranian oil could also be reduced if the EU postpones a ban on insurance for cargoes of Iranian oil. Britain confirmed EU countries were discussing whether the insurance ban should be delayed beyond July 1.
Global oil demand is weak for the time of year as high prices have eroded consumption. On the supply side, Saudi Arabia is pumping oil at the highest rate for 30 years and vociferously advocating a drop in oil prices to around $100 a barrel.
But some analysts still expect demand to grow more swiftly than supply in the second half of the year as the US driving season sets in and Saudi Arabia's limited spare capacity add to pressure on the market.
"A further $2-$3 fall is acceptable under current conditions," said Tetsu Emori, a Tokyo-based commodities fund manager at Astmax Investments.
"The market has been under pressure because of weak sentiment. But if you go by supply-demand balance, oil prices are undervalued."
Brent remains neutral above a support at $110.34 per barrel, the May 7 low, while support for US oil lies at $92.79 per barrel, according to Reuters technical analyst Wang Tao.
