Brent oil futures fell more than $2 per barrel on Monday to near six-week lows, as ample global supplies outweighed concerns over continued tensions between Russia and the West over the fate of Crimea.
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The United States and Europe imposed sanctions on Russian officials after Crimea's Sunday vote to become part of Russia. The sanctions target individuals and do not impact broad trade or financial measures, leaving oil supplies from the second largest producer in the world so far uninterrupted.
U.S. President Barack Obama reiterated that the West still hopes to resolve the crisis with diplomacy and sanctions, leaving low seasonal oil demand in the U.S. and Europe and ample global supply to weigh on oil prices.
"The whole oil complex will retreat moderately if there is no bad news coming out of Ukraine," said Richard Hastings, a macro strategist at Global Hunter Securities. "There is a lot of concern about near-term global demand."
Brent crude futures fell by $2.05 to an intra-session low of $106.16, their lowest point since Feb. 6. The European benchmark settled $1.97 lower at $106.24 per barrel.
U.S. crude futures fell by as much as $1.52 to a session low of $97.37 per barrel before settling 81 cents down at $98.08 per barrel.
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New York gasoline RBOB helped pull U.S. oil lower, falling 7.9 cents to settle at $2.8811 per gallon. U.S. refiners are at seasonal low rates for refining gasoline as many go into maintenance to prepare for the high demand of the summer driving season.
U.S. commercial crude inventories are expected to have risen last week by 2.8 million barrels on average, according to a preliminary Reuters poll taken ahead of weekly data from the American Petroleum Institute and the U.S. Energy Information Administration, which are set to be released Tuesday and Wednesday respectively.
Global oil prices had rallied into the weekend as traders bought futures contracts to cover themselves against the risk that if Sunday's vote turned violent it might impact exports from Russia.
Libyan oil production fell to less than 250,000 barrels per day after the El Sharara oil field stopped pumping due to a new protest, reinforcing traders' expectations the instability there would be protracted.
U.S. special forces troops boarded a tanker in the Mediterranean Sea that had fled the rebel-held Libyan port of Es Sider with a cargo of oil, halting an attempt by rebels to sell petroleum on the global market.
And in a separate incident, a car bomb exploded outside a Libyan army base in the eastern city of Benghazi, where the weak central government has been battling Islamist militant groups.
Investors will also be eyeing the U.S. Federal Reserve's two-day meeting which starts on Tuesday. Policymakers are likely to continue the Fed's earlier decision to cut its bond-buying pace by another $10 billion a month.
Weekly inventory data from the American Petroleum Institute will be released Tuesday at 4:30 p.m. EDT (2030 GMT). Data from the U.S. Energy Information Administration is set to be released Wednesday at 10:30 a.m..
(By Elizabeth Dilts; Reporting by Shadi Bushra in London and Keith Wallis in Singapore; Editing by Keiron Henderson, Chris Reese and Marguerita Choy)