U.S. crude oil edged up on Monday on an expectation of further draws in U.S. crude inventory, while Brent trended down despite a number of geopolitical risks.
Brent was weaker despite a number of geopolitical risks carrying over from last week, including President Barack Obama's authorization for the first U.S. air strikes on Iraq since he pulled all troops out in 2011.
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Meanwhile, expectations of a draw in U.S. oil stocks supported the higher U.S. crude prices. Traders and analysts are expecting an increase in oil stocks at the Cushing, Oklahoma delivery hub when government data is released later this week.
However, the increase is likely to be short-lived as a number of refineries are coming back online, such as CVR Refining LP 's Coffeyville, Kansas, plant, which will draw down stockpiles.
"U.S. crude closing on Brent is the story, but it's not that big of a surprise because the Kansas refinery should be coming back online in a week or two," said James Williams, an energy economist at WTRG Economics in London, Arkansas. "Traders are anticipating that any build in Cushing inventory will be temporary or minimal at best."
By 2:30 p.m. (1830 GMT), U.S. crude increased 43 cents to settle at $98.08 a barrel, while Brent slipped 34 cents to settle at $104.68 a barrel.
Much of the movement was a result of traders trying to narrow Brent's premium over U.S. crude
"I don't think the Brent premium (to U.S. crude) above $7.50 is sustainable," said Richard Hastings, a macro strategist at Global Hunter Securities in Charlotte, North Carolina. "Generally speaking the Brent premiums should stay within $4 to $6 a barrel."
On the international front, Iraq's president asked the Shi'ite coalition's nominee for prime minister to form a government, challenging incumbent Nuri al-Maliki, who has vowed to seek a third term.
NATO chief Anders Fogh Rasmussen told Reuters in an interview he saw a "high probability" that Russia could intervene militarily in eastern Ukraine and that NATO detected no sign that Moscow was pulling back its forces from close to the border.
Russia has massed 45,000 troops on its border with Ukraine, backed by an array of heavy equipment, according to a Ukrainian military spokesman.
Although the market did not respond quickly to the news, others reasoned the market may be trying to find its bearings.
"I think the whole market is rallying as the geopolitical landscape is continually shifting," said Ed Kevelson, head of U.S. Energy OTC at Newedge. "Every time traders think those risks are off the table or not germane, something pops up."
(By Catherine Ngai; Additional reporting by Jason Neely in London, Florence Tan and Theodora D'cruz in Singapore; Editing by Marguerita Choy, Jessica Resnick-Ault and Steve Orlofsky)