Oil eases under $109 a barrel - Emirates24|7

Oil eases under $109 a barrel


Oil eased below $109 on Tuesday, after rising nearly $3 in the previous session as concerns over disruptions to diesel supply mounted following a fire at a European refiner.

US crude was 18 cents lower at $108.91 a barrel at 0056 GMT, after hitting $109.48 in intra-day trade on Monday, just 2 per cent off a record high hit last month.

London Brent crude eased 24 cents to $106.90 a barrel.

Finnish refiner Neste Oil said repairs and maintenance on a diesel unit at its 200,000-barrel-per-day (bpd) Porvoo refinery would stretch through May following a fire on Friday.

The news pushed prices for London gas oil, a distillate fuel closely related to diesel and heating oil, to a record $1,005 a tonne and led US heating oil and crude prices sharply higher on the New York Mercantile Exchange.

"As we have seen in numerous instances in the past when there are unexpected refinery problems or geo-political issues oil prices tends to get a lift," said David Moore, a commodity strategist at Commonwealth Bank of Australia.

Diesel is commonly used throughout Europe as a road transport fuel.

US Energy Secretary Sam Bodman on Monday warned that US gasoline pump prices could hit a record $3.50 a gallon during the peak summer driving season, and called on Opec to lift production.

But Opec Secretary General Abdullah Al Badri stuck to the Opec line that the market was sufficiently supplied and there was no need to raise output levels.

China's oil import growth, one of the main drivers of increasing world demand, is likely to receive a boost from a government decision to grant a massive tax rebate on crude imports to help its oil firms limit heavy refining losses.

"We have to wait and see how much of an impact this rebate will have...it may facilitate an increase in oil demand from China," Moore said.

The world's third-largest crude buyer after the United States and Japan wants to avoid raising fuel prices and stoking inflation.

A Reuters poll of analysts ahead of weekly US inventory data due out on Wednesday forecast crude stocks rose 2.2 million barrels in the week to April 4. Distillate stocks were forecast to show a 1.4 million barrel draw, with gasoline down 2.6 million barrels.

Ships along the northern end of the Houston Ship Channel, which feeds eight refineries in Houston and Texas City, were stopped by dense fog on Monday morning, adding further support to prices. (Reuters)