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Oil prices fell sharply on Monday as concerns about Egypt’s political turmoil affecting oil flows in the region eased and investor focus returned to rising US inventories and a tepid employment picture.
A new cabinet met in Egypt and the government and opponents demanding change held talks, easing investor fear that the unrest started in Tunisia could affect oil producer countries.
Crude oil inventories in the United States were expected to have risen last week, with gasoline stockpiles also building, according to a Reuters survey of analysts on Monday.
US crude oil for March delivery fell US$1,55 to settle at US$87,48 a barrel, with an intra-day low of US$87,18 struck in post-settlement trading.
In London, ICE Brent crude for March fell 58 cents to settle at US$99,25 a barrel, off its US$100,90 intra-day peak.
Total US crude trading volume was 640 000 lots, the lowest level since January 3, according to Reuters data.
Brent trading volume was above 596 000 lots, 37 percent above the the 30-day average, Reuters data showed.
The US crude price weakness helped Brent crude’s price premium widen to more than US$110 a barrel.
US gasoline futures were supported by reports of refinery problems and their failure to push under technical support around the US$2,42 a gallon level.
Heating oil losses were limited by a forecast for above-normal heating oil demand.
“Oil prices fell as Egypt did not continue to descend into chaos and the employment number was a disappointing jumbled mess,” Phil Flynn, an analyst at PFGBest Research in Chicago, said in a note.
Despite optimism about economic recovery that has driven equities markets above late-summer 2008 levels, Friday’s US jobs report showed non-farm payrolls grew by only 36 000 in January, well below forecasts, though the overall unemployment rate fell.
President Hosni Mubarak’s new cabinet held its first full meeting since political protests and unrest started nearly two weeks ago. Mubarak has refused calls to end his 30-year presidency before the September election.
There have been no reports of disruptions to Suez Canal shipping or flows on the Suez-Mediterranean pipeline that brings oil from the Red Sea to the Mediterranean.
Opec has resisted the idea that the recent oil price jump should prompt the producer group to reconsider its production targets.
A member of Kuwait’s Supreme Petroleum Council said prices could exceed US$110 a barrel if political unrest in Egypt continues. Iran’s oil minister said Opec did not need an emergency meeting, even if oil rose to US$120 a barrel.
US crude stocks rose 2,59 million barrels in the week to January 28, according to the most recent report from the US Energy Information Administration.
Inventories have risen to record levels at Cushing, Oklahoma, the delivery point for West Texas Intermediate, the New York Mercantile Exchange’s light sweet crude benchmark.
The high storage levels at Cushing have been encouraged by a strong contango condition, where front-month crude values are lower than prices for months farther out.
The deficit of US front-month March crude to the April contract was above US$3 a barrel and was as wide as US$4,35 on Monday, according to Reuters data.
“We continue to view this curve weakness as symptomatic of a mounting supply at Cushing,” Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois, said in a note. —  Reuters.