Oil prices were mixed in Asia today on fears of a possible default by Cyprus as the European Central Bank said that it would halt funding to lenders if a new bailout deal is not found, analysts said.

New York’s main contract, light sweet crude for delivery in May, added 11 cents to $92.56 a barrel, while Brent North Sea crude for May delivery was down two cents at $107.45 in mid-morning trade.

The withdrawal of European Central Bank support for Cypriot banks could lead a possible run by customers scrambling to withdraw their cash, resulting in the collapse of the island’s financial system.

Analysts fear that this could lead to contagion in the Euro zone, which is already grappling with debt crises in other, bigger countries including Spain and Italy.

“The Cyprus debacle has thrown up big questions about the Euro zone’s road to recovery which many thought would start this year,” said Jason Hughes, head of premium client management at IG Markets Singapore.

“With a full0blown crisis creeping back on to the list of possible scenarios, it means a recession is also back on the cards,” he added.

PMI at 4-month low

Sentiment was further dented by data showing private business activity across the Euro zone hitting a four-month low in March.

The Purchasing Managers’ Index (PMI) published by London-based Markit fell to 46.5 points in March against 47.9 in February, the flash estimate showed. A reading above 50 indicates growth while anything below is considered contraction.

The PMI business activity data also showed that German economy, Europe’s main growth driver, was beginning to be affected by the problems in the rest of the continent.

“Much hope was pinned on Germany to lift the region out of the dumps,” DBS Group Research said in a market commentary.

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