London: Oil fell for a third straight session on Wednesday, with the US benchmark hit by weakness in equity markets.
Japan’s Nikkei average fell 2.2% on renewed concerns about European banks and the global economy, which pulled Asian stock markets down from one-month highs reached on Tuesday.
European equities declined more moderately in early trading.
The MSCI All Country World Index was also slightly down on the day.
US crude for October fell 54 cents to $73.55 a barrel by 2:00pm.
Traders attributed the decline in benchmark US crude to the weakness in share prices, which have been highly correlated with oil prices for most of 2010 because both are seen by funds as indicators of the strength of global economic recovery.
Eugen Weinberg, commodities analyst at Commerzbank in Frankfurt, said: “Today oil is a little bit under pressure from weakness in equity markets worldwide.”
US crude is trading at a steep discount of $3.65 to futures based on the European Brent benchmark. The gap reached a peak of $3.91 earlier in the day, its highest since mid-May. Brent was 57 cents down on the day at $77.17.
Weinberg said US crude’s discount to Brent was “definitely due to investment outflow, weaker demand, and high oil inventories (in the United States).”
However, he added: “A price difference of up to $4 is too much”, since both contracts were “linked to the same world market.
Total US petroleum stockpiles are at their highest since weekly records began in 1990.
Maintenance at North Sea fields and a strong Urals crude market have also contributed to Brent’s premium.
However, US crude inventories fell for the first time in three weeks last week, down by a moderate 600,000 barrels, as refineries reduced imports in preparation for stormy weather, according to a Reuters poll on Tuesday.
Weekly US industry and government statistics on inventories will be delayed by one day this week, to 2030 GMT on Wednesday for the American Petroleum Institute and to Thursday for the Energy Information Administration.
The poll also forecast a 700,000 barrel increase in stockpiles of distillates, including heating oil and diesel fuel, and a 900,000 barrel decline in gasoline supplies.