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 Brent also fell but was cushioned by continued concerns of an
escalation in the standoff in Eastern Ukraine that could lead to
further Western sanctions against Russia and disrupt supplies from
one of the world's biggest producers.
The disproportionate fall of West Texas Intermediate crude futures
led to the widening of the Brent-WTI spread by more than a dollar.
U.S. crude settled at $102.13, down $2.24 a barrel, or more than 2
percent. Brent crude settled at $109.27, down 68 cents.
The May U.S. crude oil contract expires at the end of Tuesday making
the June contract the new front month. But June futures settled
almost 2 percent lower, at $101.75 a barrel.
Analysts said in the absence of a major escalation in Eastern
Ukraine, where separatists still hold government buildings in
defiance of a peace accord struck last week, attention instead has
turned to U.S. crude oil inventories.
Stocks in the country are approaching all-time highs — after
building 10 million barrels in the week ending April 11 they reached
394 million barrels, close to the record 398 million barrels hit
last year.
The Energy Information Administration will issue inventory data on
Wednesday while American Petroleum Institute data is due later on
Tuesday. Analysts polled by Reuters think 2.7 million barrels were
added to stocks last week.
"That's going to put us at a lofty level. The all-time record is
within shooting distance here," said Bob Yawger, director of
commodities futures at Mizuho Securities. "Many market participants
are wary of extending the upside ahead of the EIA numbers tomorrow."
Weighing U.S. futures down is the unraveling of some of the
political risk premium associated with the crisis in Ukraine, which
has led to the worst confrontation between Washington and Moscow
since the Cold War.
"Going into the three-day holiday it was 'buy everything', no one
wants to be short into the weekend. Now traders acknowledge the risk
is Brent," said Phil Flynn, analysts at Price Futures Group.
"Definitely Brent is going to be the first line of attack in the
risk trade," he said.
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Brent's milder decline caused the spread between it and the U.S.
benchmark West Texas Intermediate (WTI) <CL-LCO1=R> to balloon to a
peak of $7.67 a barrel, the widest since March 26.
In Ukraine, acting President Oleksander Turchinov called for the
resumption of an "anti-terrorist" operation in the east of the
country after a local politician from his party was found dead there
with signs of torture.
U.S. Vice President Joe Biden, visiting Kiev, warned Russia "time is
short" for defusing the situation there but Russia, denying it is
orchestrating militants in the east, retorted that any resolution
will take time.
Washington signalled on Monday it could impose sanctions on Russian
President Vladimir Putin. Oil investors fear further sanctions may
disrupt oil supplies from the key producer.
Investors are also watching progress of talks between Iran and world
powers to end Tehran's nuclear program. President Hassan Rouhani's
government confirmed it had reshuffled the leadership of Iran's
atomic agency to sideline nuclear experts opposed to talks with the
West.
(Additional reporting by Ron Bousso in London and Manash Goswami in
Signapore; editing by Marguerita Choy, Tom Brown and Alden Bentley)
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