New York: Oil prices eased on Monday after a shock levy on bank deposits in Cyprus and a US survey showing a dip in consumer confidence affected market sentiment, analysts said. New York's main contract, light sweet crude for delivery in April, dropped $1.18 to $92.27 a barrel and Brent North Sea crude for May delivery shed $1.34 to $108.48.
"Oil prices have dropped in line with expectations regarding Cypriot developments," said Jason Hughes, head of premium client management at IG Markets Singapore. He said that while details remained unclear, the Cyprus move may force foreign investors trading with eurozone-based companies to "question their arrangements" in the region.
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, a one-off, unprecedented "levy" of up to 9.9 percent will be imposed on all bank deposits in Cyprus -- the first eurozone bailout in which private depositors are having to help foot the bill.
At the same time, a "withholding tax" will be imposed on interest on bank deposits, in a further hit for private investors in the Cypriot banking system. President Nicos Anastasiades on Sunday called the controversial bailout deal the "least painful" option for the financially embattled island, as rejecting the EU demands would have seen Cyprus exiting the eurozone and sinking into bankruptcy.
"The issue is not as simple as whether the Cypriot government supports the bailout. The market is worried that it may send the wrong message on the safety of bank deposits in other EU nations," DBS Group Research said in a report. Sentiments were also hit by a key index on Friday that showed a dip in US consumer confidence, possibly pointing to a slowing of 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. Analysts said the drop may have been caused by higher paycheck tax deductions and the prospect of slashed government spending in the "sequester" cuts, which took effect from the beginning of March.