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Oil turns lower on expectations of crude oil inventory rise
[NEW YORK] Crude oil futures fell on Tuesday as expectations that this week's reports will show US crude inventories rose again countered supportive news of Libyan oilfields being shut.
Prices faltered after being lifted by news the Sarir and nearby oilfields in Libya were shut by a power cut, dealing another blow to exports from the embattled OPEC member.
Greece's euro zone partners approved Greece's reform plans, also lending support to oil, but the prospect of another build in US oil inventories highlighted an over-supplied market and countered the supportive news.
"The supply dynamic will be reinforced by the inventory reports and the data are simply too compelling to ignore, and it has consistently undermined the recent rallies," said John Kilduff, partner at Again Capital LLC.
Brent April crude fell 24 cents to settle at US$58.66 a barrel, after reaching US$60.30. US April crude fell 17 cents to settle at US$49.28, off a US$50.33 intraday peak.
Ahead of Friday's March contract expirations, a squeeze on benchmark US ultra-low sulfur diesel (ULSD) futures eased on Tuesday.
March ULSD plunged more than 18 cents, sharply reducing its premium HOc1-HOc2 to April ULSD.
"The fundamental backdrop is still bearish," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt, adding there was a "huge over-supply in the market."
A Reuters survey ahead of weekly reports estimated US crude stocks, already at record levels, rose 4 million barrels last week.
Crude stocks rose 8.9 million barrels to 437 million last week, industry group the American Petroleum Institute said on Tuesday.
The US Energy Information Administration will issue its data on Wednesday at 10.30am EST.
Higher prices for crude further out on the calendar have created an incentive to store crude at the Cushing, Oklahoma, delivery point for US futures.
Stocks rose 2.4 million barrels at Cushing last week, the API said.
Scheduled refinery work and the possibility that a strike by US refinery workers might limit production has helped lift Brent's premium to US crude.
The Brent-US crude spread CL-LCO1=R narrowed on Tuesday to US$9.38 a barrel based on settlements. It rose to US$10.27 on Monday, its widest since March 2014.
Oil prices have started to stabilize around US$60 a barrel and demand is showing signs of improving in Asia and other regions, a senior Gulf Opec delegate said on Tuesday.