New York - Brent crude oil prices fell on Tuesday after a global energy watchdog described world supplies as “comfortable” and analysts forecast a continued build in the US crude inventory, while gasoline rose one percent on expected inventory draws ahead of the summer driving season.
US crude prices tumbled further late in the trading session, following news that an outage on TransCanada's 590 000-barrel-per-day Keystone oil pipeline would be resolved by Tuesday.
Earlier in the session, strong US equity markets helped support US crude.
US crude's slide allowed Brent to regain some of its premium to the US crude oil after it had earlier narrowed to the lowest level since 2011.
Brent crude oil fell 22 cents to settle at $102.60 per barrel, after trading largely within a $1 range. US crude settled down 96 cents at $94.21 per barrel.
Prices for both crudes were little changed in post-settlement trading.
US gasoline was up most of the day, ahead of the US Memorial Day holiday, considered the start of the US summer driving season.
Trading volumes were light, with US crude volumes 23 percent below the 30-day moving average and Brent volumes 19 percent below the 30-day moving average.
The International Energy Agency (IEA) said rapidly increasing non-Opec oil output would meet most of the world's extra oil demand over the next few years and it also forecast a production increase from Opec of 200 000 barrels per day, largely from Iraq.
Tim Evans, energy specialist at Citi Futures Perspective in New York, wrote in a research note that increased supply “will weigh on prices absent more end-use consumption”.
The closely followed German ZEW think tank said on Tuesday its monthly poll of economic sentiment rose to 36.4 points from 36.3 in April, indicating a smaller-than-expected improvement due to the weakness of the euro zone economy.
“The oil market is just grappling with the underlying economy,” said John Kilduff, a partner with Again Capital in New York.
North Sea Brent held a near $20 premium for much of 2012 over WTI, but the spread has narrowed steadily to less than $8. It has traded largely below $10 for the last 12 sessions, reaching a 2013 low of $7.20 on Tuesday before settling at $8.39.
The completion of pipeline projects such as the Permian Express, Longhorn and West Texas Gulf Expansion is expected to help drain some stocks out of the US Midwest and to refineries.
A stronger dollar also weighed on oil prices. A firm dollar makes commodities priced in the greenback more expensive for holders of other currencies.
The American Petroleum Institute on Tuesday released its weekly inventory report showing that US crude stocks rose 1.1 million barrels through the week ended May 10, more than the 300 000 rise predicted by a Reuters poll of analysts. Gasoline stocks fell by 480 000 barrels, less than the 800 000 decline predicted by analysts.
On Wednesday at 10.30am EDT (14h30 GMT), the US Department of Energy's Energy Information Administration will release its more closely-watched inventory report. - Reuters