Oil prices fell on Tuesday, with U.S. crude leading the decline as a refinery fire in Kansas curbed demand for benchmark WTI, while concerns over possible export disruptions stemmed losses for global marker Brent.
Brent futures pared losses after news that European Union governments agreed on Tuesday to impose additional economic sanctions on Russia. However, the rebound soon stalled as concerns eased the sanctions would have an impact oil exports in an already over supplied market.
Despite conflicts in Ukraine, Iraq and Libya, global oil production has exceeded demand, leaving pockets of excess supply in Africa and Europe. Brent crude was flat near $108 a barrel, after dropping nearly 0.8 percent in the previous session. U.S. crude dropped 70 cents to $100.97 a barrel, its lowest since mid-July.
Crude exports from second-largest OPEC producer Iraq stayed near record levels as oil output in the south remained untouched by the conflict with Islamist militants.
Olivier Jakob, an analyst at Petromatrix in Zug, Switzerland, said West African physical crude markets were over-supplied. "There are still a lot of cargoes from West Africa looking for a home," Jakob said. "But from the support side there is a lot of geopolitical input."
In Libya, oil production fell to around 450,000 barrels per day (bpd) last week as escalating violence threatened a hard-won deal to restore oil exports. Libya's capital Tripoli has slipped into chaos, but analysts said the OPEC producer's low output, at way below 1 million barrels per day for close to two years, has already been factored into oil prices.
U.S. and European leaders agreed on Monday to impose wider sanctions on Russia's financial, defence and energy sectors, although these were not expected to impact Russian oil exports.
In the United States, traders watched for weekly data on gasoline stocks, which have been weighing on U.S. crude prices. A Reuters survey said U.S. gasoline stocks could have risen by 1 million barrels last week, adding to bloated supplies. U.S. commercial crude oil inventories probably dropped in the week to July 25, the survey showed.
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