Brent Falls Below $109, Greek Fear Weighs
May 17, 2012 5:51 PM IST
(REUTERS) -- Brent futures slipped below $109 on Thursday, hitting a fresh four-month low, as investors avoided riskier assets due to the deepening turmoil in Greece and fears of contagion spreading to other stressed euro zone economies.
A fall in U.S. crude prices was limited by hopes that reversing flow on the Seaway oil pipeline would help reduce a supply glut at the land-locked delivery point at Cushing, Oklahoma.
Brent crude futures slipped by 76 cents to $108.99 a barrel by 1137 GMT, having hit $108.95, the lowest intraday price since January 25.
U.S. crude slipped into negative territory, falling 12 cents to $92.67. On Tuesday, it hit $91.81, its lowest intraday level since November 3.
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"The oil market, like other risky assets, is within the grips of uncertainty surrounding the eurozone," said Harry Tchilinguirian, BNP Paribas head of commodities strategy.
The euro hovered near four-month lows and European shares extended losses.
Earlier in the day, U.S. crude rose on the expected reversal on Thursday of the Seaway pipeline piping oil from Cushing, the delivery point for U.S. crude, to Houston, the country's main refining centre on the Gulf Coast.
"The Seaway pipeline reversal starts today and this could support WTI," said Yusuke Seta, a commodity sales manager at Newedge Japan.
He was referring to West Texas Intermediate, or WTI, an underlying crude for U.S. crude futures.
Brent's premium over U.S. crude, the Brent-WTI spread, fell to a six-week low of $15.48 a barrel, after widening to one-month high of $19.46 on Wednesday.
Mark Thomas, head of energy Europe with brokerage Marex Spectron, expected the spread to remain volatile. He added the Seaway reversal might to be too small to clear supply overhang in the United States.
"I do not believe the reversal will be enough to counter the inflow of extra crude going into Cushing from Canada and the rest of the U.S.," Thomas said.
U.S. crude inventories rose to their highest level in 21 years last week, government data showed on Wednesday.
Talk of an emergency stock release also weighed on oil prices. Kyodo news agency reported that U.S. President Barack Obama had moved to seek support to tap emergency oil reserves from other G8 leaders at a summit this weekend before the European Union's July embargo of Iranian crude.
The International Energy Agency remained ready to release emergency oil stocks if needed as oil prices remained a threat to the fragile global economic recovery despite a recent fall.
The ambassador said U.S. plans for a possible military strike on Iran are ready and the option is "fully available".
Iran is due to resume talks with world powers next week over its disputed nuclear program.
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