Brent crude prices dipped on Tuesday in tug-of-war trading as market players factored concerns over global supply against the likelihood of a release of US strategic oil reserves to cap rising fuel costs. US crude futures also saw choppy trading before ending slightly higher.
In early trade, prices for both crude contracts edged higher on reports of production problems in the North Sea and South Sudan. These added to persistent fears about potential disruption of supply from Iran as Tehran and the West spar over the Opec nation's nuclear program. Oil prices then turned negative after a Bloomberg report quoted Charles McConnell, assistant secretary for fossil energy at the US Energy Department, as saying a release from reserves "is being considered."
A US government official told Reuters the Obama administration had not changed its stance on tapping the reserves or other options under consideration to help cool fuel prices. Rising gasoline prices have become a focus of the US presidential race, prompting the White House to seek ways to ease bottlenecks in the US oil network in hopes of lowering pump prices.
Brent May crude slipped 11 cents to settle at $125.54 a barrel, having swung from $124.91 to $126.18. US crude rose 30 cents to settle at $107.33 a barrel, having moved from $106.52 to $107.73. Oil prices have jumped more than 15 percent this year on concerns about the potential loss of supply from No 2 Opec exporter Iran as the West implements sanctions aimed at curtailing Tehran's nuclear ambitions.
Brent has stayed mostly in a range between $121 and $127 a barrel since late February, with traders waiting for news that would alter their recent outlook. "The factors that drove us over $100 are still underpinning the market," said Gene McGillian, analyst for Tradition Energy in Stamford, Connecticut, adding that prices seemed to be consolidating around current levels and could be poised for another move to the upside.
"There seems to be more violence in Sudan, but Iran is probably the primary reason behind the geopolitical price premium in the market." South Sudan said the air force of neighbouring Sudan bombed key oilfields in a cross-border raid on Tuesday, adding to global production fears.
Providing additional support for Brent was news that oil flows through the BP-operated Forties pipeline had been curbed by the shutdown of Total's Elgin platform. Total shut oil and gas production from its North Sea Elgin platform on Sunday following a gas leak. Ahead of weekly reports on US oil inventories, stocks are expected to have increased by 2.6 million barrels last week, according to a Reuters survey of analysts. Distillate stocks are expected to be near flat, down only 100,000 barrels, and gasoline stocks down 1.3 million barrels, the survey showed. US average gasoline demand fell 1.5 percent in the week to March 23, from the previous week, MasterCard said in its weekly Spending Pulse report. Demand was off 7 percent from the year-ago period, the report said.
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