Crude oil futures ended slightly lower in thin trade on Thursday as expectations of more supply from the Middle East and North Africa weighed against news of lower oil output from OPEC.
U.S. crude oil futures traded marginally lower over the day, and settled down for the second time this week. However, losses were capped by data showing a drop in jobless claims and a rise in consumer prices to their highest in six months in the world's largest oil consumer.
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Brent largely held steady between an expected increase in supply from Libya and Iran and OPEC cuts.
"The overall trading range in Brent has been a narrow range" due to mitigating geopolitical factors, said Dominick Chirichella, a partner at Energy Management Institute.
Brent crude for February delivery expired down 4 cents at $107.09 a barrel, after settling 74 cents higher on Wednesday. Brent March crude oil, which becomes the front month on Friday, settled down 52 cents at $105.75 a barrel.
Losses in Brent were capped by an analyst's report that seaborne oil exports from the Organization of the Petroleum Exporting Countries, excluding Angola and Ecuador, will fall by 660,000 barrels-per-day (bpd) in the four weeks to Feb. 1.
U.S. crude settled down 21 cents at $93.96 a barrel, after ending $1.58 higher on Wednesday. The February contract expires on Tuesday, after the Martin Luther King, Jr. holiday on Monday. Floor trading on the New York Mercantile Exchange is shut on Monday and settlement prices will not be posted.
The spread between the two oil benchmarks <CL-LCO1=R> narrowed to $12.35, the smallest gap in nearly two weeks, before widening at settle at $13.13.
Analysts said West Texas Intermediate's (WTI) recent strength against Brent is likely temporary.
"I'll trust that strength a lot more if I can see gasoline regain losses," said Walter Zimmermann, chief technical analyst for United-ICAP.
TransCanada announced the southern leg of its 700,000 barrel per day Keystone XL pipeline will only run at less than half capacity bpd when it begins service, expected on Jan. 22.
Traders anticipate the pipeline would play a role in easing a supply glut of WTI crude in Cushing, Oklahoma, where the contract is priced, and narrow its discount to Brent.
Heating oil futures pared gains to settle 0.2 percent higher at $2.9845 per gallon from a midmorning high of close to $3. Gains were capped as gas oil stocks at Europe's Amsterdam-Rotterdam-Antwerp hub rose 5.8 percent this week, indicating less of a need for U.S. fuel exports.
OPEC lowered its oil output further and is pumping less than this year's global need for its crude. OPEC pumps a third of the world's oil, but analysts said a drop in production is not enough to sway U.S. domestic crude oil markets.
OPEC's forecast could get a boost if negotiations between Iran and world powers, due to start in February, end a dispute over the Islamic republic's nuclear program and result in easing sanctions that are blocking up to 1.2 bpd of its oil exports.
A resolution could mean a glut of supply as Iranian oil comes online, though Iran's foreign minister said he expected other OPEC producers to reduce production to make room for rising Iranian oil supplies.
Libya's southern El Sharara oilfield resumed production last week, increasing supply from the North African producer by more than 300,000 bpd. Output would rise even further if a blockade of Libya's eastern oil ports were to end.
(By Elizabeth Dilts; Additional reporting by Christopher Johnson in London and Jacob Gronholt-Pedersen in Singapore; Editing by Anthony Barker, Jane Baird, Peter Galloway and David Gregorio)