Brent crude prices slipped on Thursday on fears of a delay in a second bailout package for debt-ridden Greece, although worries of supply disruption from Iran and US data showing an unexpected drop in inventories limited the drop.
Prices rose to a six-month high in the previous session on supply worries as Iran declared progress on its nuclear capabilities, including ability to enrich uranium faster, triggering concerns of rising tension with the West.
Brent crude retreated by 36 cents to $118.57 a barrel by 0400 GMT, after settling at $118.93 on Wednesday. US crude slipped 29 cents to hold at $101.51, while the premium of the European benchmark over U.S. crude remained below $17.
“The volatility in risk assets, concerns of supply in the Middle East, and drawdown of US crude inventories are all putting a floor on oil prices,” Ben Le Brun, market analyst at OptionsXpress. “Tensions in Iran will always be supportive of oil prices regardless of growth concerns.”
Iran’s President Mahmoud Ahmadinejad comments on Wednesday showed Tehran’s resolve to pursue a nuclear programme, without any signs of wavering despite tighter Western sanctions.
Additional support for oil prices came from the US, after latest data showed a surprising drop of 171,000 barrels in the week to February 10 in crude oil stockpiles last week, against a forecast for a 1.5 million-barrel increase.
“While OPEC crude oil output has reached near three-year highs of 31 million bpd, supplies have been crippled in the former-Sudan, Yemen and Syria, the combined output of which countries normally totals almost 1.2 million bpd,” analysts at Barclays said in a report dated Wednesday.
Yet, oil fell in line with broader markets due to worries that Greece’s debt crisis will worsen and hurt the global economy. Asian shares, the euro to copper, all lost ground as policymakers fail to arrive at a concrete decision.
After a three-hour teleconference between euro zone finance ministers, a government official in Germany said questions still remained from the Greek side, possibly delaying a final decision on the bailout.