Brent falls below $112 as cliff rally loses steam
Singapore , January 3, 2013
Brent crude slipped below $112 a barrel on Thursday as investors' focus shifted from a deal to avert the US "fiscal cliff" to rising oil supply and more budget battles ahead in Washington.
Brent crude fell 57 cents to $111.90 a barrel by 0219 GMT, after rising more than 1 percent on Wednesday to settle at the highest since October.
US crude for February delivery was down 57 cents to $92.55 after closing at its highest since September.
"After the initial excitement, reality sets in," said Victor Shum, oil consultant at IHS Purvin & Gertz. "There will be other negotiations and the deal is a compromise."
President Barack Obama and congressional Republicans face even bigger budget battles in the next two months after the hard-fought deal halted a round of automatic fiscal tightening that threatened to push the world's largest economy into recession.
"If one focuses on the oil fundamentals, pricing at the current level appears overbought," Shum said, pointing to a fragile global economy and growth in oil production from non-Opec countries.
"In 2013, Opec may have to limit supply in order to accommodate a rise in non-Opec oil production growth," he said.
Crude production in the US has hit a 19-year high while Russia pumped the most oil in the world last year, ahead of Saudi Arabia.
In the United States, a major pipeline expansion that aims to ease the bottleneck at Cushing, Oklahoma that has depressed U.S. crude prices should pump at full rates from the end of next week.
The spread between Brent and West Texas Intermediate has narrowed to about $19 a barrel, down from 2012 highs of about $26.
Investors will be scouring weekly data on US jobless claims and oil inventories due later on Thursday for further cues on economic health and fuel demand in the world's largest economy.
US commercial crude oil stockpiles likely fell last week due to lower imports as refiners drew down inventories for year-end tax purposes, a preliminary Reuters poll of eight analysts showed.
The American Petroleum Institute (API) will release its report on Thursday, delayed due to the New Year day's holiday on Tuesday. The US government's Energy Information Administration (EIA) will issue its data on Friday. - Reuters