London - Oil prices slumped Monday on weak demand concerns and fears of an escalation in the eurozone debt crisis after bloc member Cyprus announced that it planned to tax bank deposits to raise bailout cash, analysts said.
Brent North Sea crude for delivery in May shed $1.64 to $108.18 a barrel in London midday deals - close to three-month low points struck last week.
New York's main contract, light sweet crude for April, dropped $1.11 to $92.34 a barrel.
Eurozone finance ministers and the International Monetary Fund on Saturday agreed on a 10 billion-euro ($13-billion) bailout deal for Cyprus, the fifth eurozone member to be saved from bankruptcy.
Under the deal, deposits of more than 100,000 euros will be hit with a 9.9-percent charge and one of 6.75 percent for anything below the threshold.
The proposal must still be passed by parliament, which has postponed until Tuesday a session to vote on the deal.
Crude prices were falling on “increased risk aversion in the wake of the controversial bailout package for Cyprus at the weekend,” said Commerzbank analyst Carsten Fritsch.
“In the short term the pressure is likely to continue as further financial investors are expected to withdraw from the market.”
President Nicos Anastasiades on Sunday called the controversial proposal the “least painful” option for the island, as rejecting the EU demands could force Cyprus to leave the eurozone and sink into bankruptcy.
DBS Group Research said “the issue is not as simple as whether the Cypriot government supports the bailout.”
It added: “The market is worried that it may send the wrong message on the safety of bank deposits in other EU nations.”
Oil market sentiment was meanwhile hit also by a key index on Friday that showed a dip in US consumer confidence, possibly pointing to a slowdown in household spending.
The University of Michigan confidence index for early March fell to 71.8 from 77.6 in February, against forecasts that predicted a rise. - Sapa-AFP