Crude futures ended slightly lower Wednesday, settling at nearly the same level where the session began as traders slogged through a mess of oil-demand forecasts, rekindled Europe concerns, the closure of a major refinery and the State Department's decision to oppose the Keystone XL Pipeline.
Light, sweet crude for February delivery settled 12 cents lower at $100.59 a barrel on the New York Mercantile Exchange, down from as high as $102.06 earlier in the session.
Brent crude on the ICE futures exchange traded 85 cents lower at $110.68 a barrel.
Oil prices wavered between gains and losses throughout the session as a mix of economic data, outside markets and oil-demand forecasts left traders at a loss in gauging the market's direction. A rising euro initially pushed crude above $102 a barrel early in the session, but those gains were squandered after ratings firm Egan Jones downgraded Germany's debt to AA- from AA. The three major ratings firms still rate Germany AAA, but the cut by Egan Jones rekindled worries about Europe's effect on the global economy, and with it, oil demand.
In its monthly oil-market report released Wednesday the International Energy Agency warned of "the rising likelihood of a sharp economic slowdown, if not outright recession," due to Europe's debt crisis, and slashed its demand forecast for the first quarter of 2012.
The IEA forecast, "should be a clear warning signal that we are not in a bull market," said Tim Evans, an oil analyst with Citie Futures Perspective, though he said investors' focus currently lies elsewhere.
"There are a whole lot of traders out there that are focused on things outside of the physical fundamentals, whether that is tensions with Iran or the S&P 500," he said.
Oil prices have been stuck in a tight range near $100 a barrel since the beginning of the year. Investors remain concerned about demand declines in oil and fuel products and the situation in Europe, but many are equally worried that rising tensions between Iran and the West could scuttle bets on falling prices.
"We just keep getting this battle back and forth between good news and bad news in Europe. It's been the case for six months," said Tom Bentz, a director at BNP Paribas Prime Brokerage.
Dominick Chirichella, an analyst at the Energy Mangement Institute, said: "The only reason I see oil at the current level is geopolitical risk due to Iran."
Meanwhile, the Obama Administration is denying approval to the Keystone XL oil pipeline from Canada to the Gulf Coast, a key route for new supplies from Alberta's oil sands region that has drawn criticism from environmental activists.
Despite tepid moves in crude Wednesday, gasoline futures surged. February reformulated gasoline blendstock, or RBOB, settled 5.41 cents, or 2%, higher at $2.8254 a gallon.
The gains followed Hess's decision to close the Hovensa refinery in St. Croix, U.S. Virgin Islands. The shutdown of the refinery, which supplies fuel to the highly competitive markets on the east coast of the U.S., will likely force consumers to pay higher prices for gasoline imports, analysts said.
"The big story today is products, and the Northeast really now needs to be concerned," said Andy Lipow, head of energy advisor Lipow Oil Associates.
February heating oil settled 2.38 cents lower at $3.0134 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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