US crude futures ended more than a dollar lower today on optimism that Iran and Britain would find a diplomatic solution to the standoff arising from Tehran's seizure of 15 British naval personnel.
Losses were pared in late trading after Britain's foreign secretary urged caution against speculation that there would be a rapid solution to the dispute.
Traders squared books ahead of tomorrow's release of US government inventory data, with forecasts calling for a build in crude stocks and draws in gasoline and distillate supplies.
On the New York Mercantile Exchange (Nymex), May crude settled $1.30 lower, or 2%, at $64.64 per barrel, trading from $63.96 to $65.94.
In London, ICE May Brent crude ended down 93 cents, or 1.4%, at $67.81, trading from $67.04 to $68.72.
British Foreign Secretary Margaret Beckett urged caution against rising speculation that the crisis with Iran would be quickly resolved.
"I would urge you to be cautious in assuming that we are likely to see a very swift resolution to this issue," Beckett told reporters.
At the same time Beckett said that Britain was not seeking any military confrontation with Iran and wanted to resolve the 12-day standoff through diplomacy.
British Prime Minister Tony Blair said earlier the way was open for diplomatic efforts to secure the release of 15 British sailors and marines seized by Iran, and the next 48 hours would be critical.
Blair's comments followed remarks yesterday by Ali Larijani, the secretary of Iran's Supreme National Security Council, who said he believed bilateral diplomacy could resolve the crisis quickly. Britain responded by saying it too would like early talks to end the dispute.
The confrontation over the sailors came as the West and Iran tangled over Tehran's nuclear programme, with US and French naval task forces parked in the region.
After helping lead the complex higher in recent weeks amid falling US inventories, refined products were much weaker today. Fresh US inventory oil data will be released by the US Energy Information Administration tomorrow morning.
Analysts polled by Reuters expected slight changes in inventories last week from the week before.
A rebound in crude imports likely helped lift crude stocks by 600,000 barrels, the average forecast in the poll showed.
Distillate supply was expected to be down 600,000 barrels and gasoline down 300,000 barrels, with refinery use up 0.6 percentage point, the poll found.
NYMEX May RBOB gasoline finished 2.51 cents lower, or 1.2%, at $2.0177 a gallon, trading $1.9857 to $2.0430.
May heating oil ended down 2.38 cents, or 1.3%, at $1.8387 a gallon, trading $1.81 to $1.86.
In related news, the 2007 Atlantic hurricane season will be more active than usual, with an expected 17 tropical storms, of which nine will strengthen into hurricanes, a noted Colorado State University forecasting team said today.
The forecasters said the disappearance of the El Nino phenomenon in the Pacific Ocean, which tends to dampen Atlantic hurricane activity, and warm Atlantic sea surface temperatures lay behind their upgraded forecast.
At the same time, Opec, excluding Iraq and Angola, was still above its quota target, despite trimming crude oil production by 120,000 barrels per day in March versus February, according to a Reuters survey.
The 10 Opec members bound by output agreements pumped 26.54 million bpd in March, versus the 25.8 million bpd target Opec set for the 10 members, effective 1 February.
Venezuela restricted traffic through the Lake Maracaibo ship channel following the grounding of a tanker. Tankers carrying crude from Venezuela's oil-rich Zulia state must pass through the narrow channel to reach Caribbean waters.
© Upstream 2007
