Oil fell on Friday as a bout of profit-taking following big moves in spreads this week overtook early euro zone optimism. Oil gained early as the euro rose against the dollar on speculation the European Central Bank may start lending to the International Monetary Fund to bail out big eurozone economies. That gave a lift to commodities denominated in the greenback.
US crude dipped in early New York trade and Brent followed it into negative territory just before noon, as concerns about the eurozone and weak US demand re-emerged added to selling pressure from the expiry of the December US contract and profit-taking.
"(Prices) got a lift early on because the ECB was buying bonds, but I think there is some scepticism about how much leeway the ECB has to support the bond market that way," said Tim Evans, energy analyst for Citi Futures Perspective in New York. In London, ICE Brent crude dipped 66 cents to settle at $107.56 a barrel, off the session high of $109.99.
Trade in the front-month December US crude oil futures contract was light ahead of expiry at the settlement on Friday as volumes moved to the January contract. December US crude slid $1.41 to settle at $97.41 a barrel, while January futures fell $1.26 to settle at $97.67 a barrel.
"Liquidations on the December contract and profit-taking ahead of the Thanksgiving holiday week pulled down US crude futures," said Phil Flynn, analyst at PFGBest Research in Chicago. The futures curve for US crude, also called West Texas Intermediate, flattened and moved toward a contango structure in which prompt prices were discount to later months, a sign that concerns were easing about tight near-term supplies. WTI shifted from a contango to backwardation in late October on signs an oversupply of crude in the US Midwest was easing.
Brent's premium to US oil futures widened around $1.40 to over $10 a barrel as the US contract held flat, with traders taking profits on the spread after it narrowed $3 a barrel earlier in the week on news a pipeline reversal could draw down Midwest stockpiles.
"Crude prices rallied early as the euro jumped against the dollar, but that has fizzled out to a certain extent," said Mark Anderle, trader at TAC Energy in Dallas, Texas. "Volume is light, and after what has come to be a crazy week some people are just deciding to close out some positions." US crude trading volume trailed the 30-day average by about 16 percent in afternoon activity, while Brent volumes were about 25 percent below that average.