June 10 (Bloomberg) -- Brent and West Texas Intermediate crudes fell as tension eased between Ukraine and Russia, with the European benchmark’s larger decline narrowing the premium to WTI to the least since April.
Brent dropped 0.4 percent after Ukraine said talks with Russia yielded progress, widening the spread between the two grades for a third day. WTI, which fell 6 cents on the day, breached $105 a barrel in intraday trading for the first time since March on speculation that the government will report tomorrow that U.S. supplies fell a second week.
“There needs to be a steady flow of news to support prices at these lofty levels,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “WTI rose earlier on expectations of tightening supply, but that wasn’t enough to keep prices higher. All the markets are down after the big moves higher.”
Brent for July settlement fell 47 cents to close at $109.52 a barrel on the London-based ICE Futures Europe exchange. Volume was 43 percent higher than the 100-day average at 4:41 p.m. in New York.
WTI for July delivery settled at $104.35 a barrel on the New York Mercantile Exchange. Futures touched $105.06, the highest intraday price since March 3. The volume of all futures traded was 24 percent above the 100-day average. Prices are up 6 percent this year.
Prices retreated after the American Petroleum Institute said U.S. supplies fell 1.5 million barrels last week, according to TradeTheNews.com, a newswire. July WTI slipped 9 cents to $104.32 at 4:39 p.m. in electronic trading in New York from $104.56 before the report was released at 4:30 p.m.
The European benchmark crude closed at a $5.17 premium to WTI, the tightest in eight weeks.
Equities were little changed, ending a rally that sent the Standard & Poor’s 500 Index to a record close the past four days. The S&P 500 dropped less than 1 point. The Dow Jones Industrial Average gained 2.82 points to an all-time high.
Two days of talks with Russia led to an agreement to implement parts of President Petro Poroshenko’s peace plan, Ukraine’s Foreign Ministry said in a statement. The negotiations in Kiev will continue in the same format, which involved the Organization for Security and Cooperation in Europe, according to the Ukrainian Foreign Ministry.
“Brent is under pressure because it looks like there may soon be a cease-fire in eastern Ukraine,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion.
Fuel prices dropped with Brent. A decline in the price for the North Sea oil reduces the cost of crude and fuel imports to the U.S. East Coast.
Gasoline for July delivery declined 1.03 cents, or 0.4 percent, to settle at $2.9745 a gallon on the Nymex. Ultra low sulfur diesel decreased 0.71 cent, or 0.3 percent, to close at $2.8841 a gallon in New York.
U.S. crude supplies probably fell by 2 million barrels to 387.5 million last week, according to the median of 11 analyst responses in a Bloomberg survey before the release of Energy Information Administration data tomorrow. Stockpiles were at 399.4 million in the week ended April 25, the most since the EIA began publishing weekly data in 1982.
Refineries probably operated at 91.1 percent of capacity last week, up 0.3 percentage point from May 30, according to the survey. Operating rates usually increase in late spring and have peaked in July during the past five years.
The API collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines, while the government requires that reports be filed with the EIA, the Energy Department’s statistical arm, for its weekly survey.
“There may be some tightening but supplies remain ample, so rallies are vulnerable,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “There’s a real risk that there will be a rush to the exits unless we see a real improvement in the economy and fuel demand, or a new supply disruption.”
The Organization of Petroleum Exporting Countries, which pumps about 40 percent of global crude supply, will probably keep its production target unchanged at 30 million barrels a day when it meets in Vienna tomorrow, said oil ministers including Venezuela’s Rafael Ramirez, Ecuador’s Pedro Merizalde and Iraq’s Abdul Kareem al-Luaibi.