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Brent slips from US$75/barrel as investors doubt rally will endure
[NEW YORK] Oil prices eased after Brent touched US$75 per barrel on Thursday for the first time in nearly six months on the suspension of some Russian crude exports to Europe as investors second-guessed the market's ability to rally further.
Brent crude futures settled at US$74.35, losing 22 cents, or 0.30 per cent, after rallying for most of the day to a high of US$75.60, the strongest since Oct. 31.
US West Texas Intermediate crude settled at US$65.21 a barrel, falling 68 cents, or 1.03 per cent, after hitting a session high of US$66.28.
Prices began to slip just before the settlement in a technical move, analysts said.
"I think the inability to hold US$66 most of the day saw some of the late-comers give up the ghost, so it was really a technical move," said John Kilduff, a partner at Again Capital LLC in New York. "There's just some fatigue in this market after the spectacular gains."
Poland and Germany suspended imports of Russian crude via the Druzhba pipeline, citing contamination. The pipeline can ship up to 1 million barrels per day, or 1 per cent of global crude demand, and about 700,000 bpd of flow was suspended, according to trading sources and Reuters calculations.
Russia, the world's second-largest crude exporter, said it planned to start pumping clean fuel to Europe through the pipeline on April 29.
US crude inventories were also an overhang, analysts said.
"To a certain degree, the storage build yesterday was a pretty big one, plus the first build in a couple weeks at Cushing, has put some pressure on WTI," said Mizuho director of futures Bob Yawger.
US crude inventories last week rose 5.5 million barrels to their highest since October 2017 at 460.6 million barrels, as stocks at the Cushing, Oklahoma, delivery hub for WTI rose 463,000 barrels, government data showed on Wednesday.
The United States this week said it would end all exemptions for buyers of Iranian oil. OPEC's third-largest producer has been under US sanctions for more than six months, but several major buyers, including China and India, were given temporary exemptions until this week. Beginning in May, those countries have to halt oil imports from Tehran or face sanctions.
The decision follows supply cuts by the Organization of the Petroleum Exporting Countries and non-member producers, including Russia, since the start of the year aimed at propping up oil prices.
Still, Brian Hook, US special representative for Iran and senior policy adviser to the secretary of state, said on Thursday "there is plenty of supply in the market to ease that transition and maintain stable prices".
Consultancy Rystad Energy said Saudi Arabia and its main allies could replace lost Iranian oil.
The cuts led by Opec are in part a response to ballooning US crude production, currently at a record 12.2 million bpd, making the United States the world's biggest producer.