By Robert Gibbons
NEW YORK (Reuters) - Crude oil futures fell on Tuesday as concerns about weak demand as a result of uncertainty in Europe outweighed worries about threats to Middle East production and the effect of U.S. output cuts.
Pro-Russian rebels and government forces fought street-to-street in east Ukraine, dampening hopes that a European-brokered peace deal will end the conflict.
"Growing concerns about whether a cease-fire will hold and Greece's problems have got people worried about demand for oil in a shaky European economy," said Phil Flynn, analyst at Price Futures Group in Chicago.
Front-month April Brent crude
U.S. March crude
"I think it all started in silver with squeezing out of long positions, then spilled over to gold and then to oil," said Carsten Fritsch, commodities analyst at Commerzbank. Copper and other base metals fell on concerns about demand in China and the breakdown of debt talks between Greece and its European partners on Monday night.
Gold and silver fell to six-week lows.
Meanwhile, oil output growth has started to slow in some regions, and may be stunted in others. Libya's oil exports have collapsed to just a trickle as violence in the country has shut all major ports and the internal conflicts highlight the threat from groups linked to Islamic State.
International Energy Agency Chief Economist Fatih Birol on Tuesday warned the rise of Islamic State presented a major challenge for the investment necessary to prevent an oil shortage in the next decade.
Iraq's semi-autonomous Kurdistan Regional Government threatened to withhold oil exports if Baghdad failed to send its share of the budget.
Oil prices collapsed in the second half of 2014 on oversupply. The Organization of the Petroleum Exporting Countries did not cut output, choosing to defend market share against U.S. shale oil and other competing sources.
Supported by a sharp fall in U.S. oil drilling, Brent crude has staged a recovery after falling to $45.19 on Jan. 13, the lowest in almost six years and down from $115 in June.