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Brent oil falls as Russian supply worries ease

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[March 20, 2014]  By Elizabeth Dilts

NEW YORK (Reuters)  Brent oil futures fell on Wednesday as worries over sanctions affecting Russian oil supplies eased, while U.S. crude oil rose on an inventory draw at the benchmark's pricing hub and ahead of the front month contract's expiration.

Western sanctions imposed on Monday against Russia over its annexation of Ukraine's Crimea targeted individuals accused of involvement and not broad trade.

Washington and Brussels said further sanctions would follow. On a trip to Japan, Igor Sechin, CEO of Russian oil major Rosneft and close ally of Putin, said expanding sanctions would only aggravate the crisis.

Brent settled 94 cents lower at $105.85 per barrel after falling by $1.08 to an intra-day low of $105.71 per barrel, the lowest since Feb. 5.

"There is weakness in Brent because it doesn't appear that anything immediate is going to happen in Ukraine," said Joseph Posillico, senior vice president at Jefferies Bache in New York.

U.S. crude oil stockpiles soared nearly 6 million barrels last week, more than double forecasts, as refinery utilization fell during a time of low seasonal demand, U.S. Energy Information Administration data showed.

U.S. crude futures rose in spite of the build as a 989,000-barrel draw at the Cushing, Oklahoma, oil hub lent support. As well, the April contract expires Thursday, spurring some investors to cover short positions.

U.S. crude for April delivery rose 67 cents to settle at $100.37 per barrel. U.S. crude for May delivery, which will become the front-month contract on Friday, rose 29 cents to settle at $99.17 per barrel.

"(For U.S. oil) the Cushing stock draw is giving strength to the calendar spreads, and that's providing support," Posillico said.

Brent's premium over U.S. crude <CL-LCO1=R> settled $1.23 tighter at $6.68 per barrel, its narrowest settlement since March 7.

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The operator of the Seaway pipeline, which takes crude from Cushing to the U.S. Gulf Coast, said the conduit would be ready to double shipments as soon as late May, earlier than some analysts had expected.

This will drain stockpiles at Cushing and lend support to U.S. crude prices, analysts say.

The Federal Reserve further trimmed its bond-buying stimulus to $55 billion a month and dropped the U.S. unemployment rate as its definitive yardstick for gauging the economy's strength, making it clear it would rely on a wide range of measures in deciding when to raise interest rates.

(Additional reporting by Robert Gibbons in New York, Alex Lawler in London, and Jacob Pedersen in Singapore; editing by Dale Hudson, Jane Baird, Chris Reese and Marguerita Choy)

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