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 Oil fell more than $1 after copper prices dropped to four-year lows
on worries that other firms may follow Shanghai Chaori Solar Energy
Science and Technology Co Ltd, which defaulted last week.
Further pressuring the American benchmark, U.S. crude stocks rose
2.6 million barrels last week, the American Petroleum Institute
reported. That was more than the 2.2 million barrel build analysts
had expected.
Traders will compare the industry group's data with the U.S. Energy
Information Administration's official weekly inventory report due on
Wednesday at 10:30 a.m. EDT (1430 GMT).
Brent oil futures rose on geopolitical risk as Western powers moved
closer to issuing sanctions against Russia, and Libya's navy opened
fire on a tanker after it had loaded oil at a rebel-held port.
Brent futures settled 47 cents higher at $108.55 per barrel. U.S.
crude fell $1.09 to settle at $100.03 a barrel, its lowest
settlement price since Feb. 11. The American benchmark fell further
in post-settlement trade, holding near a low of $99.52 per barrel.
Brent's premium over U.S. crude <CL-LCO1=R> settled $1.56 wider at
$8.52, its widest settlement since Feb. 17 as the geopolitical risk
posed by Ukraine and Libya drove traders to cover short positions.
The spread narrowed to as tight as $5.44 on March 5, its tightest
point in almost five months.
Copper and oil markets typically move in tandem, and Tuesday's
downward move may signal a larger slide coming in the commodities
sector, analysts said.
"Copper is a barometer not just for energy prices but also for the
world economy," said Brian LaRose, a technical analyst at United-ICAP.
"It is telling a very different story than oil markets lately — that
there is a risk of recession and a more sizeable pull back in the
commodities sector."
"The energy markets may quickly catch up to copper, exacerbating a
move to the downside."
The French foreign minister said sanctions against Russia could come
as early as this week, and Poland's prime minister said the European
Union would issue sanctions on Monday.
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Libya's parliament voted Prime Minister Ali Zeidan out of office
after a tanker loaded with oil from a rebel-held port escaped the
navy, officials said. The Libyan navy opened fire on the tanker,
damaging and therefore stalling the vessel, a Libyan military
spokesman said.
Meanwhile, state oil officials said Libya's El Sharara oilfield
increased production to around 200,000 barrels a day, up from
150,000 bpd on Monday, but analysts said output remained uncertain
in the long term.
Also in the API report, crude stocks at the Cushing, Oklahoma,
delivery hub fell by 1.3 million barrels, and gasoline stocks fell
by 2.2 million barrels, slightly more than expected as refiners take
down plants for scheduled maintenance.
That report follows recent data from China that showed a sharp drop
in exports, pointing to weak economic activity.
The U.S. Energy Information Administration (EIA) cut its forecast
for 2014 world oil demand growth by 40,000 bpd in its monthly Short
Term Energy Outlook on Tuesday. It predicted a 1.22 million barrel
year-on-year increase.
(Additional reporting by Ron Bousso
in London and Manash Goswami in Singapore; editing by Anthony
Barker, Jason Neely, Bernadette Baum, Diane Craft and David
Gregorio)
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