Crude-oil futures prices settled lower Tuesday amid news of record-high unemployment in the euro zone and expectations of rising oil stockpiles in the U.S.
Traders said some investors were taking profit after recent gains, and awaiting signals on central bank policies and indications on oil demand.
European benchmark North Sea Brent crude oil came under pressure after news that the March unemployment rate in the euro-zone economies hit a record high of 12.1%.
"The driving force behind the market right now is economic policy," said Phil Flynn, analyst at Price Futures. He noted that while euro-zone unemployment rose, inflation slowed to 1.2% to 1.7%, meaning the European Central Bank has "no reason to not lower rates" when it meets Thursday.
In the U.S., traders are awaiting the outcome of a two-day meeting of the Federal Reserve's policy-making board and are expecting signals of a continuation of a loose-monetary policy. "What we're hoping for is a sign that the Fed will commit to further action, if needed," said Carl Larry, analyst Oil Outlooks and Opinions.
Light, sweet crude oil for June delivery on the New York Mercantile Exchange posted the biggest drop in two weeks to settle 1.1%, or $1.04, lower at $93.46 a barrel.
June Brent crude oil on the InterContinental Exchange settled 1.4%, or $1.44, a barrel lower at $102.37.
Rapidly rising supplies of U.S. and Canadian crude oil is slashing domestic refiners' demand for imports and putting strong pressure on internationally traded Brent.
Brent's premium to the U.S. benchmark, West Texas Intermediate crude oil, continued to shrink, settling at $8.91 a barrel, the narrowest level since December 2011.
The spread stood at $14 a barrel on April 1 and was near $20 a barrel on March 1. Analysts project a near-term slump to $5 to $7 for the spread once increased pipeline flows allow more oil to drain from the Midwest to the key Gulf Coast refining region.
Gene McGillian, broker and analyst at Tradition Energy, said lofty crude oil stocks and sluggish demand for petroleum products in a stammering U.S. economic recovery will keep pressure on near-term prices.
"Until we see any sign of a real pickup demand, prices are going to languish," Mr. McGillian said. "We need to see more than one week of signs of a pickup in gasoline demand," he said, referring to unexpectedly strong signals from U.S. oil-demand data last week. Government forecasts, however, project spring-summer gasoline demand will slide to a 12-year low this year, led by greater use of more fuel-efficient vehicles.
Analysts surveyed by Dow Jones Newswires expect coming U.S. data to show crude oil inventories--already not far from their highest level since July 1990--rose by 800,000 barrels in the week ended April 26, despite a rise in refinery operations.
Gasoline stocks are expected to slip 600,000 barrels in the week, while distillates (diesel/heating oil) are expected to rise 300,000 barrels.
The American Petroleum Institute, a trade group, is set to issue its oil inventory report at 4:30 p.m. EDT, while the widely watched government data from the Energy Information Administration is due at 10:30 a.m. EDT Wednesday.
May-delivery gasoline and heating-oil futures were weaker on their last trading day.
May reformulated gasoline blendstock futures expired down 2.65 cents at $2.801 a gallon. That was the weakest settlement price on expiration day since November 2012.
May heating oil settled 2.72 cents lower, at $2.8735 a gallon. The contract, which trades as a proxy for diesel fuel used in trucks and trains, posted the weakest price on expiration day since July 2012.
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