LONDON: Global oil prices diverged Monday as dealers focused on the Federal Reserve's upcoming policy meeting in anticipation of a further scaling back of US central bank stimulus.
Brent North Sea crude for delivery in March shed 61 cents to stand at $107.27 a barrel in London afternoon deals.
New York's main contract, West Texas Intermediate (WTI) for March, added 43 cents to $97.07 a barrel.
Trading volumes remain thin, however, as markets wait to see if the Fed's Federal Open Market Committee (FOMC) will cut $10 billion from monthly asset purchases when it meets on Tuesday and Wednesday.
Tan Chee Tat, investment analyst Phillip Futures, said investors were sitting on the sidelines amid "heightened anticipation that they (the Fed) will further engage in tapering".
The US central bank's FOMC this month began tapering the stimulus by $10 billion to $75 billion a month.
"If they were to taper, in the short term, it is likely to hurt demand for crude oil," Tan told AFP.
The so-called tapering of the Fed's asset purchases would likely boost the greenback, making dollar-priced oil more expensive for countries using other currencies, dampening demand.
But Tan said in the long-term, the move would signal "better prospects for crude oil" as it indicated the Fed's confidence in the US economy, which would translate into stronger demand.
He added that investors were also closely monitoring developments following the recent opening of the Southern leg of the controversial Keystone XL pipeline in the United States.
The $2.3 billion pipeline last week started carrying crude 487 miles (785 kilometres) from Cushing in Oklahoma to Gulf Coast refineries in the southern state of Texas.
The pipeline's initial transportation rate of 300,000 barrels per day, about half of its maximum capacity, has so far disappointed investors.
"It is possible that they are transporting at lower capacity now due to the pressure exerted by environmental activists to prevent oil spills," Tan said.
"They are still at the monitoring stage and I expect a gradual increase in transportation to full capacity."
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