06 March 2014, News Wires – Brent crude held steady just below $108 a barrel on Thursday, as investors looked for direction after a heavy sell-off in the two previous sessions prompted by easing geopolitical risk over the crisis in Ukraine and US data suggesting weaker oil demand.
Oil prices have fallen between $4 and $5 a barrel since spiking on Monday due to the threat of an armed conflict in Ukraine and tension between Russia and the West over the former Soviet republic.
The drop was aggravated by a larger than expected rise in US crude stocks and by data showing private employers in the US added fewer workers than forecast in February and services sector growth hit a four-year low.
“The market has collectively come to the conclusion that an armed conflict in Ukraine is not on the cards, so we’ve seen speculative positions being sold off,” said Michael McCarthy, chief strategist at CMC Markets.
“Combined with the strength in crude supply in the United States, there doesn’t seem to be much upside for oil at least in the short term,” McCarthy said.
Brent oil for April delivery was up 20 cents at $107.96 a barrel early on Thursday, after settling $1.54 lower. The contract hit $112.39 on Monday, its highest since 30 December, but had settled below its key 200-day moving average of $108.41 on Wednesday for the first time in a month.
US crude for April delivery was 34 cents lower at $101.11 a barrel, after ending the previous session $1.88 lower.
Geopolitical worries over Ukraine eased on Wednesday as high-level diplomatic efforts to resolve the crisis in Kiev went underway in Paris. Foreign ministers from Ukraine, Russia and Western nations agreed to continue discussions in coming days on how to stabilise the situation, US Secretary of State John Kerry said.
Still, slim gains in global equities and a slightly higher Brent price suggested investors were not that convinced that the Ukraine crisis is off the table.
US crude stockpiles rose more than expected last week as imports increased and refinery output fell, data from the Energy Information Administration (EIA) showed on Wednesday.
Crude inventories rose by 1.4 million barrels in the week ending 28 February, compared with analysts’ expectations for a build of 1.3 million barrels. Imports rose by 75,000 barrels per day and refinery utilisation slipped 0.6%.
Further weighing on oil demand, US oil refiners are expected to take 1.6 million bpd of capacity offline in the week ending 7 March, up from 1.4 million bpd the previous week, data from research company IIR showed.
Adding to negative sentiment in oil markets, US private employers added fewer workers than forecast in February and services sector growth hit a four-year low as the Federal Reserve said the severe US weather was to blame for the slower economic growth.
“The downbeat data out of the United States is painting a weaker picture for oil demand than the market has gotten used to recently,” said McCarthy of CMC Markets.
Oil prices were supported by news that Libya’s El Sharara oil field remains shut by an ongoing sit-in protest and comments from the field’s manager that there was no sign of production resuming.