Further pressuring the American benchmark, traders expected another big build in US crude stockpiles when the government releases its weekly inventory data Wednesday. Brent oil futures rose on the ongoing tensions in Ukraine, as the European Union and United States prepared sanctions against Russia that could come soon. Brent futures settled 47 cents higher at $108.55 per barrel. US crude fell $1.09 to settle at $100.03 a barrel, its lowest settlement price since February 11.
Brent's premium over US crude settled $1.56 wider at $8.52, its widest settlement since February 17. 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." Brent was supported by escalating tensions over the Russian military intervention in Ukraine and Libya's domestic fight to regain control of oil output. 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.
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.
Indicating a weak demand outlook, US crude inventories are expected to have risen by 2.2 million barrels on average last week as a bitter cold spell ends and as refiners take down plants for scheduled maintenance. That forecast follows recent data from China that showed a sharp drop in exports, pointing to weak economic activity. The US 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.