Brent slips on fears Europe debt crisis will dent demand
Easing of geopolitical tensions has lifted uncertainty about supply
London: Brent crude futures dropped for a second day this week amid concern that Europe's debt crisis may curb oil consumption, while US benchmark West Texas Intermediate was little changed.
North Sea Brent declined as much as 1 per cent while European equities fell and the euro declined against the dollar. A ceasefire in Syria and plans for renewed negotiations next month between Iran and the five permanent members of the United Nations Security Council plus Germany reduced the likelihood of more supply disruptions in the Middle East. US crude stockpiles climbed for a fourth week, data from the industry-funded American Petroleum Institute (API) showed.
"The Brent market is gradually weakening on poor fundamentals and a lower geopolitical risk in the market," Torbjoern Kjus, an oil analyst at DNB of Norway, said by phone from Oslo. "Europe is not looking good at all, and it's not going to look any better for oil demand anytime soon," said Kjus, who forecasts the grade will average $115 this year.
Futures
Brent for June settlement fell as much as $1.18 on the London-based ICE Futures Europe exchange and was down $1.03 cents, or 0.9 per cent, at $117.75 a barrel in morning trade. The European benchmark contract's front month premium to West Texas Intermediate was at $13.21, the lowest since January 31. The spread was at $14.14 yesterday.
US crude for May delivery was at $104.15 a barrel, down 5 cents, in electronic trading on the New York Mercantile Exchange. The contract gained 1.2 per cent to $104.20 on Tuesday, the highest close since April 2. Prices are 5.4 per cent higher this year.
Iran crisis
"Brent is under pressure from the renewed flaring-up of the sovereign-debt crisis in the Eurozone, the resulting rise in risk aversion and the decrease in the risk premium due to recent signs of a slight easing in the Iran crisis," Carsten Fritsch, an analyst at Commerzbank in Frankfurt, said in a note.
Iranian delegates will meet with the five permanent UN Security Council members and Germany on May 23 in Baghdad after "constructive" talks in Istanbul, the European Union's foreign policy chief said on Sunday.
Officials from 57 countries, meeting in France, voted yesterday to tighten sanctions on Syria. Russia halted deliveries of light arms to Syria to avoid exacerbating a conflict between government forces and opposition groups, a person close to the Defence Ministry in Moscow said yesterday. Syria was the eighth-largest oil producer in the Middle East in 2010, according to the most recent data from BP.
US stockpiles
US crude stockpiles increased 3.4 million barrels last week, the API said on Tuesday. An Energy Dep-artment report yesterday was expected to show that they expanded 1.8 million barrels, according to the median of ten analyst estimates in a Bloomberg News survey.
Gasoline inventories dropped 2.6 million barrels, the API said. They are forecast to slip 1.1 million barrels, according to the Bloomberg survey. Distillate supplies, a category that includes heating oil and diesel, fell 2.4 million barrels compared with a projected 125,000 barrel decline.
US President Barack Obama urged Congress on Tuesday to bolster federal supervision of oil markets, including bigger penalties for market manipulation and greater power for regulators to increase the amount of money traders must put up to back their energy bets.
