SINGAPORE: Brent crude slipped to a three-week low at $108 a barrel on Thursday as tensions over Ukraine cooled, while ample supply in top oil consumer United States also dragged down prices.
News that Ukraine's President-elect and western leaders were working on a peace plan to end violence in the east of the country helped allay concerns that a conflict in the region, a main gas supply route to Europe from Russia, could disrupt oil supplies as well.
"The situation (in Ukraine) seems to be getting better, so prices are unlikely to spike," said Ken Hasegawa, a Tokyo-based commodity sales manager at Newedge Japan. Brent fell for a fifth session, matching a similar losing run in January, and was down 17 cents at $108.23 a barrel by 0502 GMT. It earlier hit $108, its lowest since May 12.
Geopolitical tensions pushed up Brent to above $111 a barrel last month, but prices have shed about 3 percent since then. US crude fell 33 cents to $102.31 a barrel.
"There's some shortcovering after last night's drop, but we need to wait for ECB's action today and US employment data tomorrow," said Hasegawa. "It's hard to bet on either side."
The failure of both benchmarks to rise above resistance levels on technical charts also depressed prices, he said. Brent's premium to West Texas Intermediate (WTI) crude on Wednesday fell below $6, its narrowest since April 15, after crude stockpiles in the United States dropped more than expected on lower imports and higher refinery utilisation rates.
Further crude drawdowns at WTI's delivery point in Cushing, Oklahoma could strengthen the US oil benchmark and narrow its spread with Brent to $3.30 a barrel by end-June, Hasegawa said.
But crude stocks remain near the top of the typical range for this time of year and an overall 8.8-million barrel rise in total hydrocarbon inventories last week painted a bearish picture, BNP Paribas analysts said in a note.
"The scope for further increases in refinery runs from these levels however appears limited to us in absence of a marked rise in product exports," the analysts said.
The United States is unlikely to repeat the sharp seasonal decline in crude stocks seen in June-July last year, due to strong domestic production, they said.
"We believe the door is still open for a short term correction in prompt WTI, possibly below $100 a barrel, notably if Cushing stocks were to hold above 20 million barrels."
Investors are eyeing an announcement from the European Central Bank (ECB) later on Thursday which might unveil plans to introduce stimulus to boost economic growth, which would lift oil demand.
The United States will also release key employment data on Friday that may reinforce a recovery trend at the world's largest economy.
Comments
Comments are closed for this article.