London: Brent crude futures eased on Wednesday, givig up earlier gains, due to worries that Europe may fail to deliver a firm solution to its sovereign debt crisis.
Investors remained cautious ahead of the meeting of euro zone heads of state due at 1730 GMT after EU officials said there was little likelihood of concrete details or numbers being agreed.
“European economic uncertainty is keeping a lid on prices but the resurgence in Chinese demand stops markets falling too far,” said Jefferies Bache oil broker Christopher Bellew.
Brent crude futures which have lagged the US crude rally of 6.5% in the last three sessions, were 23 cents lower at $110.69 a barrel by 3:29pm.
US crude was 42 cents up by the same time at $93.59 a barrel, after posting gains yesterday of around 1.6%.
The prospects for a comprehensive deal to resolve the euro zone debt crisis look dim, with deep disagreement remaining on critical aspects of the potential agreement, including how to give the region’s EFSF bailout fund greater firepower.
“There is an alarming vacuum as far as facts are concerned when you consider that we were told a ‘comprehensive solution´ would be revealed at today’s summit,” David Hufton wrote in a note from PVM. “There is no agreement it seems on two of the key pillars of a solution - the Greek debt haircut level and the mechanism to increase the EFSF’s fire power.”
Brent’s premium to US crude narrowed to $16.98 after it closed on Tuesday at $17.75, the narrowest settle since early July and coming in sharply from a record of about $28 a barrel on 14 October.
“There’s been a lot of hope that the euro zone would get their act together. But maybe that was a little bit overdone on the upside and a little over optimistic,” said Tokyo-based risk manager Tony Nunan of Mitsubishi Corp.
Eyes are on the US Energy Information Agency’s weekly oil stockpiles data due at 1430 GMT, which according to a Reuters poll should show an increase as imports rebounded from a steep drop in the previous week.
Stockpiles of crude are expected to have risen 1.3 million barrels for the week ended 21 October.
According to data from industry group American Petroleum Institute late on Tuesday, US crude oil stocks rose 2.7 million barrels last week, more than double the 1.3 million barrel build forecast by the Reuters poll.
But total US oil inventories have tightened and are approximately 8% lower than the same time last year at 332.9 million barrels, according to the EIA.
The Midwest crude surplus is subsiding, at least temporarily, with stocks at Cushing, Oklahoma -- delivery point for WTI -- plunging by more than a quarter since hitting a 42 million barrel high this spring.