Oil fell for the third time in four days on reports that President Barack Obama discussed a release from the U.S. Strategic Petroleum Reserve with U.K. Prime Minister David Cameron.
Futures declined 0.3 percent as Jay Carney, the White House press secretary, said the leaders reached no agreement. The price dropped as much as 1.6 percent in intraday trading after Reuters reported that two people it didn’t name said the U.K. has decided to cooperate with the U.S. on a supply release with gasoline pump prices over $3.80 a gallon.
“The market took a massive tumble on the rumors of a SPR release,” said Stephen Schork, president of the Schork Group in Villanova, Pennsylvania. “It makes sense that they would be planning a release now. We will have to see if the bears can continue to keep us lower.”
Crude oil for April delivery declined 32 cents to $105.11 a barrel on the New York Mercantile Exchange. It was the lowest settlement since March 6. Futures are up 6.4 percent this year.
Brent oil for April settlement fell $1.42, or 1.1 percent, to end the session at $123.55 a barrel on the London-based ICE Futures Europe exchange. The contract expired today. May futures slipped $1.98, or 1.6 percent, to $122.60.
The European benchmark contract’s premium to New York-traded West Texas intermediate oil narrowed to $18.44, the least since March 7. The spread reached a record $27.88 on Oct. 14.
Democrats in the U.S. Congress have called on Obama to use the oil stockpile to fight an increase in gasoline prices spurred by tensions with Iran over its nuclear program.
“Oil prices and surety of supply have become a top priority, and markets are justifiably nervous,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “Upside price risks remain high.”
The U.S. has withdrawn oil 18 times since 1985, including in 2008 after hurricanes struck the Gulf Coast. The U.S. reserve was used in July and August last year, under an International Energy Agency effort to ease shortages of Middle East supply.
“A global release, not just U.S. action, will be needed to calm markets,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “This is a sign that we will be seeing coordinated releases.”
Oil in New York climbed above $110 a barrel on March 1 for the first time since May as escalating tension between Iran and the West threatened supplies. The U.S. and its allies say Iran is seeking the capability to make an atomic bomb. Iran says its program is for civilian energy and medical research.
Futures rose in early trading today after the leading worldwide financial messaging service for international money transfers announced that it will stop providing services to Iranian banks subject to European Union sanctions. Iran’s central bank is included in the list.
The Society for Worldwide Interbank Financial Telecommunication, known as Swift, said it is taking the action effective March 17 in response to EU regulations.
“The SPR rumors came 30 minutes after the release of the Swift headlines, overwhelming what is very bullish news for oil,” Schork said.
Futures rose as high as $106.18 a barrel earlier on data showing U.S. economic growth. The Labor Department said U.S. unemployment insurance applications fell to 351,000 last week, matching a four-year low. The Federal Reserve Bank of New York’s general economic index unexpectedly increased to 20.2 this month from 19.5 in February.
“Prices have climbed quite a bit and we need a period of consolidation at the least,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “The biggest bearish factor is word that Obama and Cameron were talking about an SPR release.”
Goldman Sachs Group Inc. said global spare production capacity is at “dangerously low levels” and the market will tighten, pushing Brent oil higher this year.
Increased exports from Saudi Arabia and Libya, members of the Organization of Petroleum Exporting Countries, are being absorbed by consumers, David Greely, Goldman’s head of energy research in New York, said in a report distributed today.
“We expect prices to average $130 in 2013, so we expect them to rise higher between now and then,” Greely said. “On a 12-month horizon we see Brent prices at $127.50.”
Production rate declines at oilfields in OPEC have “accelerated precipitously” and will continue to worsen, Bank of America Corp. said today in an e-mailed report.
Electronic trading volume on the Nymex was 796,119 contracts as of 4:55 p.m. in New York. Volume totaled 671,171 contracts yesterday. Open interest was 1.57 million.