Oil fell by more than $1 on Wednesday as fears eased that Russia's incursion into Ukraine could lead to war, deflating oil's geopolitical risk premium, while U.S. government data reflected weaker oil demand.
Russian President Vladimir Putin said on Tuesday he would use force in Ukraine only as a "last resort". On Wednesday, he said he did not want political tension to detract from economic cooperation with Russia's "traditional partners".
Data released on Wednesday morning by the U.S. Energy Information Administration (EIA) underscored that heating oil demand was beginning to ease as Europe and the United States head into spring, and that crude oil demand continues to edge lower as European and U.S. refiners move into maintenance season.
U.S. crude for April delivery tumbled $1.88 to settle at $101.45, after falling $1.59 on Tuesday. The U.S. contract hit its highest since Sept. 20 on Monday at $105.22. Its discount to Brent narrowed to as little as $5.59 on Wednesday, the smallest gap since October.
April Brent crude was down more than 1 percent to under $108 a barrel, extending Tuesday's $1.90 drop.The contract hit $112.39 a barrel on Monday, its highest since Dec. 30. Crude held losses after data showed private payroll growth was less than expected in February.
Distillate stocks, which include heating oil, rose unexpectedly last week by 1.4 million barrels, the data showed, compared with a forecast of a 1.2-million-barrel draw, which weighed on U.S. oil prices and on heating oil futures.
Stocks at Cushing fell 2.6 million barrels last week and are down almost 25 percent since the end of January. New pipeline projects have helped reduce a glut in the Midwest created by the U.S. shale oil boom, supporting U.S. oil prices.
U.S. oil refiners are expected to take 1,608,000 barrels per day (bpd) of capacity offline in the week ending March 7, up from 1,412,000 bpd the previous week, data from research company IIR showed on Wednesday.
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