Oil prices turned negative for the year after dropping on Monday as traders and investors focused on the possibility of oversupply in crude amid dissipating tensions that initially threatened tanker movements in the Middle East.
Brent, the global benchmark for crude, was down 65 cents, or 1 per cent, at $64.33 per barrel by 11:37 a.m. EST (15:37 GMT), continuing its slide from the middle of last week when the United States and Iran moved away from an outright war after Tehran fired missiles at US airbases in Iraq.
West Texas Intermediate (WTI), the US crude benchmark, was down 74 cents, or 1.3%, at $58.28 per barrel.
As of Monday, Brent was down 2.6% on the year while WTI showed a 4.5 per cent loss.
Brent hit four-month highs of $71.75 last week, while WTI surged to an eight-month peak of $64.72, reacting to the Tehran action which was in retaliation to the US killing of top Iranian general Qasem Soleimani on January 3. But the missile attacks on the Iraqi airbases did not kill anyone and US President Donald Trump stood down from escalating his fight with Iran, easing geopolitical tensions in the Middle East, which often send oil prices higher. Oil tankers avoided the Strait of Hormuz that straddles Iran last week as a precaution
Iran was rocked by street protests on Monday in response to the Islamic Republic’s accidental downing of a Ukraine Airlines flight while firing at the US airbases in Iraq. But the unrest was contained and did not threaten the movement of oil in any way.
Easing geopolitical tensions aside, analysts said oil prices were also pressured by worries that crude supplies could balloon from seasonal lows in demand.
Lending credence to that theory was US government data showing crude stockpiles rising by 1.2 million barrels for the week ended January 3, versus market expectations for a decline of 3.6 million barrels.
US gasoline inventories jumped by 9.1 million barrels for the same week, compared with expectations for a rise of 2.7 million barrels. Distillate stockpiles rose by 5.3 million barrels, versus forecasts for a build of 3.9 million barrels.