Brent falls towards US$58 as supply fears linger

Brent fell towards US$58 a barrel yesterday, extending the 2 per cent loss in the previous session, as oversupply fears lingered, overshadowing any optimism on the outlook for the global economy. The oil benchmark had traded above US$59 in early Asian trade before negative sentiment overtook, dragging prices 7 per cent off its near two-month peak reached last Tuesday. Brent fell 41 cents to US$58.49 a barrel by 0640 GMT, while U.S. crude was down 51 cents at US$48.94. U.S. crude stocks are expected to have increased by 4 million barrels to a record high in the week ending Feb. 20, a preliminary Reuters survey showed on Monday. Refinery woes weighed on crude prices. The largest U.S. refinery strike in 35 years affecting 12 refineries that account for a fifth of national production capacity continued into its fourth week, and talks to end the strike are not expected to resume this week. "The spreads for crude oil are becoming severely altered by the refinery strikes. For the WTI-Brent spread, with a lower capacity to refine crude oil, WTI remains in excess in the market compared to Brent. This causes the spread to widen," Phillip Futures analysts said in a note yesterday. The price difference between Brent and WTI stood at US$9.57 a barrel at 0632 GMT, after hitting US$10.27 on Monday, the widest since March 2014. However, hopes that the global economy is on the path of recovery limited losses. "The US economy looks exceptionally strong, the eurozone is showing its first signs of recovery, and lower global oil prices are boosting demand," the Economist Intelligence Unit said in a note yesterday. German business morale inched up to a seven-month high in February, the Ifo index showed on Monday. "People are starting to get a sense of economic recovery and that's providing a bit of support and an underlying stream of confidence," said Jonathan Barratt, chief investment officer at Sydney's Ayers Alliance. Crude rose briefly on Monday when the Financial Times cited Nigeria's oil minister as saying the country would call an OPEC extraordinary meeting if prices dropped further. But lingering doubts stemming from key Gulf OPEC members' resistance to curb production pared gains. - NAMPA / REUTERS