NEW YORK: US crude prices tumbled Thursday after an extended US refinery outage revived concerns about a glut of crude sitting in the middle of the country.
A barrel of West Texas Intermediate crude for delivery in March fell 79 cents to $95.83 a barrel on the New York Mercantile Exchange.
The drop in WTI crude came as European oil benchmark Brent crude rose 51 cents to $117.24 a barrel, a dynamic that once again increased the spread between the world's two benchmark crudes.
WTI has been trading at a deep discount to Brent because of an excess of crude at the landlocked Cushing, Oklahoma, trading hub.
That overhang was expected to be worked off with the expansion of the Seaway pipeline, which would increase the amount of oil that could move from Cushing to Gulf Coast refineries.
But the Seaway pipeline has encountered operational problems, reducing the capacity of the line.
In addition, operations at BP's large Whiting, Indiana-based refinery has been curtailed due to maintenance. On Thursday, reports surfaced that the Whiting outage would be longer than expected, said John Kilduff, a trader at Again Capital.
"It's increasingly bearish news on a sort of localized basis for WTI," Kilduff said.
US markets were also taking a second look at Wednesday's US oil inventory report, which saw an increase in crude stockpiles, said analyst Andy Lipow.
"The market has second thoughts about the inventories that came out yesterday showing a build of crude oil," Lipow said.
Meanwhile, prices of Brent crude were on an upward trajectory thanks to rising geopolitical concerns about Iran in the aftermath of an escalation of US sanctions on the country.
Ayatollah Ali Khameni Thursday rejected a US offer to negotiate one-on-one on Tehran's nuclear ambitions.
"You (Americans) are pointing the gun at Iran and say either negotiate or we will shoot," Khameni told air force commanders in remarks published on his website.
Khamenei said: "Iran will not accept to negotiate with he who threatens us with pressure," in reference to a series of sanctions adopted by Washington to coerce Iran into curbing its nuclear program.
The growing hostility between the US and Iran strengthened Brent as the international oil benchmark by raising fears that oil supplies could be affected.
The Brent market has also garnered upward support by news that some oil output in the North Sea would be curtailed in the coming weeks, said Kilduff.