Oil fell on Tuesday in tug-of-war trading, with caution about petroleum demand growth curbing prices even as North Sea cargo delays and the prospect of tightening sanctions on Iran's exports limited losses. Light trading volume for Brent and US crude contributed to the choppy trading trajectory ahead of the long Easter holiday weekend, even as prices remained stubbornly range-bound.
"Essentially the market is continuing the pattern we saw last month, when it couldn't find a clear direction," said James Zhang, energy analyst at Standard Bank. "Few people are willing to aggressively short this market given the geopolitical risk." After surging more than 2 percent in the previous session, Brent had losses limited by support from delays to North Sea loadings caused by a leaking Total oil and gas platform and one of BP Plc's shut for unplanned work, along with the uncertainty over Iran.
Oil prices felt pressure from news that, according to industry sources, Saudi Arabia is likely to maintain high oil production in the event consumer countries release strategic oil reserves, though the kingdom will not seek to attract buyers for more oil by discounting its crude.
Weighing on US crude was Monday's report from the Energy Information Administration showing US oil demand in January fell 4.5 percent year-on-year, with January gasoline demand the weakest since 2001. But the dismal demand data and weak crude prices did not prevent US gasoline futures from continuing their seasonal rise on a lift from inventory drops as fuel with winter specifications is drawn down, while recently shut US refineries and maintenance at others also provided support.
Brent crude slipped 43 cents to $125 a barrel by 1:17 p.m. EDT (1717 GMT), having slumped to $124.42, just above the 30-day moving average of $124.36. The intraday peak was $125.97. US crude fell 78 cents to $104.45 a barrel, having traded from $104.13 to $105.18. Brent's premium to US crude strengthened to $20.93 intraday, the highest since October, Reuters data showed.
Total trading volumes for Brent outpaced US crude turnover, but dealings for both contracts lagged their 30-day averages. Oil market participants awaited weekly US oil inventory reports, first from industry group the American Petroleum Institute at 4:30 p.m. EDT (2030 GMT) on Tuesday.
Crude prices jumped 2 percent on Monday as US manufacturing data and Sunday's report showing China's big factories operated at a surprisingly busy pace in March combined to bolster hopes that demand for petroleum would be supported. But China's central bank chief warned on Tuesday that the global economy could slip back into recession.
"We are still in the global financial crisis period, there are new elements that may bring the global economy back to recession," Zhou Xiaochuan said at a conference in China. At least seven cargoes of North Sea Forties crude loading in April have been delayed and three cancelled, trading sources said, following production problems including the shutdown of Total's Elgin platform because of a gas leak. BP's Valhall platform in the Norwegian North Sea, shut last week for unplanned maintenance, produces oil flowing into the Ekofisk production stream. The Valhall shutdown has led to delays to seven Ekofisk shipments, according to traders.
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