Ukraine’s President-elect and western leaders are working on a peace plan to end violence in the east of the country which caused oil prices to rise above $110 a barrel in May.
Brent crude fell for a fifth session, matching a similar losing run in January, and was down 10 cents at $108.30 a barrel early on Thursday. It earlier hit $108, its lowest since 12 May.
US crude for July delivery fell 27 cents to $102.37 a barrel.
“The situation (in Ukraine) seems to be getting better, so prices are unlikely to spike up,” said Ken Hasegawa, a Tokyo-based commodity sales manager at Newedge Japan.
The failure of both benchmarks to rise above resistance levels on technical charts also depressed prices, he said.
Brent’s premium to West Texas Intermediate crude on Wednesday fell below $6, its narrowest since 15 April, after crude stockpiles in the US dropped more than expected on lower imports and higher refinery utilisation rates.
Further crude drawdowns at WTI’s delivery point in Cushing, Oklahoma could strengthen the US oil benchmark and narrow its spread with Brent to $3.30 a barrel by end-June, Hasegawa said.
But crude stocks remain near the top of the typical range for this time of year and an overall 8.8-million barrel rise in total hydrocarbon inventories last week painted a bearish picture, BNP Paribas analysts said in a note.
“The scope for further increases in refinery runs from these levels however appears limited to us in absence of a marked rise in product exports,” the analysts said.
The US is unlikely to repeat the sharp seasonal decline in crude stocks seen in June-July last year, due to strong domestic production, they said.
“We believe the door is still open for a short term correction in prompt WTI, possibly below $100 a barrel, notably if Cushing stocks were to hold above 20 million barrels.”
Investors are eyeing an announcement from the European Central Bank later on Thursday which might unveil plans to introduce stimulus to boost economic growth.
The US will also release key employment data on Friday that may reinforce a recovery trend at the world’s largest economy.