Oil prices fall as hopes for EU crisis fix sag

New York's benchmark January contract for WTI crude lost $2.15 to close at $98.34 a barrel.

In London, Brent North Sea crude for January dropped $1.42 to $108.11.

Early in the day prices were up on hopes, ultimately confirmed, that the ECB would cut its main interest rate for the second month running to spur economic activity.

It cut the key rate by a quarter percentage point to 1.00 per cent, amid worries the economy of the 17-state eurozone was poised to fall back into recession.

But then ECB president Mario Draghi sent markets falling after saying action to buy up the sovereign bonds of debt-wracked countries was "limited" and "temporary."

Analysts called the interest rate cut favorable for markets and thus oil demand.

"The potential for downside, however, remains significant and it seems that, in the absence of any material European (summit) developments, crude prices will hold in a narrow range before tomorrow," said Sucden Financial Research analyst Jack Pollard.

Investors are concerned that a two-day summit that began late Thursday in Brussels to save the eurozone may fail to deliver a knockout blow to the region's sovereign debt crisis.

Meanwhile in Syria, a pipeline carrying crude oil to a refinery in Hom was bombed, according to official and activist sources.

The Syrian Observatory for Human Rights, a Britain-based activist network, reported the explosion of "an oil pipeline in Homs which transports crude to the (central) city's refinery from eastern Syria."

The government blamed "terrorists" for sabotaging the pipeline and anti-government forces blamed the state.

There was no information immediately available on how badly the pipeline was damaged.

In Canada the government approved a new oil sands mining project in Alberta province proposed by Total and Suncor, forecast to produce 100,000-200,000 barrels per day starting from 2017.