Brent crude prices fell on Thursday on news beleaguered President Hosni Mubarak of Egypt may step down later in the day as investors struggled to digest the day's flow of geopolitical and fundamental issues. US crude oil futures found support early from data showing US jobless benefit claims fell to a 2-1/2-year low, a sign economic recovery was gathering momentum, before later paring gains on the Mubarak news.
The gains in US crude helped narrow its discount to Brent futures by about $2, after it hit a record of $16.09 a barrel. The low US crude prices have supported margins for refiners, with the US heating oil crack spread jumping to $29.93 a barrel, the widest since June 2008. The gasoline crack spread rose to $20.15, the widest since July 2007. The market also weighed reports from the International Energy Agency and the Organisation of the Petroleum Exporting Countries that the producer group last month raised oil output to the highest level since December 2008. However, both groups raised their demand forecasts.
In London, Brent crude for March delivery settled down 95 cents at $100.87 a barrel, after having hit an early high of $102.88. US oil prices retraced most of their early gains, with March futures posting a settlement price of $86.73 a barrel, up 2 cents, after rising to a session high of $87.90 early.
US gasoline and heating oil futures slumped more than 2 percent, falling back after sharp gains on Wednesday. "Since Brent had the biggest rally due to events in Egypt, I would expect that it could be the one to fall the hardest from a Mubarak departure," said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc in New York. Earlier, oil prices rose on reports that the Saudi king may have died, but then Saudi officials said the king was in "excellent shape."
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