Brent oil drops below $109
London, March 5, 2014
Brent crude oil futures fell for a second straight session on Wednesday, dropping below $109 a barrel on easing fears that Russia's incursion into Ukraine could lead to war.
Brent is now almost $4 below a two-month high hit at the start of the week following Russia's seizure of Ukraine's autonomous Crimea region, erasing gains seen on Monday.
US crude fell less than Brent, narrowing its discount to the international benchmark to its lowest since October after an industry report showed a fifth consecutive weekly drawdown in inventories at the Cushing, Oklahoma storage hub.
"We've seen prices coming off as some of the risk premium comes down following comments yesterday by President Putin," said Gareth Lewis-Davies, a senior energy strategist at BNP Paribas in London.
Russian President Vladimir Putin said on Tuesday he would use force in Ukraine only as a "last resort". Russia is the world's largest crude producer and supplies a third of Europe's gas.
April Brent was down 68 cents at $108.62 per barrel at 1033 GMT, after ending $1.90 lower in the previous session. The contract hit $112.39 on Monday, its highest since December 30.
US crude for April delivery was down 31 cents at $103.02, after falling $1.59 on Tuesday. Its discount to Brent narrowed to as little as $5.47 on Wednesday, the smallest gap since October.
Tensions in Ukraine remain elevated, however, with the Interfax news agency reporting Russian forces had seized two Ukrainian missile defence battalions in the Crimea region on Wednesday. The Ukrainian Defence Ministry was unable to comment immediately on the report.
In the Middle East, three members of the pro-Western Gulf Cooperation Council withdrew their ambassadors from fellow member Qatar, complaining of interference in others' internal affairs.
Oil analysts said, however, that the rare public display of discord among the Gulf states was unlikely to hurt energy supplies from the region.
Brent could find support from news that China has said it expects to grow at the same pace in 2014 as last year, potentially boosting oil demand in a country set to overtake the United States as the largest crude importer.
The 2014 growth target is pegged at 7.5 per cent, while China aims to keep consumer inflation around 3.5 per cent for the year, Premier Li Keqiang said.
The American Petroleum Institute's weekly report on US oil stocks showed a 2.6-million-barrel drop at Cushing.
Stocks at Cushing have fallen more than 20 per cent since the end of January, boosting US crude prices as new pipeline projects help reduce a glut in the Midwest created by the US shale oil production boom.
The Cushing drop overshadowed a 1.2-million-barrel increase in commercial crude oil inventories nationally, which was in line with analyst expectations.
Numbers from the government's Energy Information Administration (EIA) are due at 1530 GMT.
In Libya, top officials said they were looking into demands made by protesters that have blocked the 340,000 bpd El Sharara oil field, but a field manager on Wednesday said there was no sign production was about to resume.
Output in Libya has fallen to around 230,000 barrels per day (bpd) from 1.4 million bpd in July, as protests hit oilfields and ports. - Reuters