Crude oil lower ahead of U.S. supply data; WTI-Brent spread narrows

Investing.com - Crude oil futures were lower in rangebound trade during European morning hours on Tuesday, as a broadly stronger U.S. dollar weighed while traders looked ahead to weekly supply data on U.S. oil stockpiles.

Meanwhile, the spread between New York-traded crude and London-traded Brent narrowed as investors unwound spread trades put in place earlier in the month.

On the New York Mercantile Exchange, light sweet crude futures for delivery in March traded at USD96.73 a barrel during European morning trade, down 0.3% on the day.

New York-traded oil prices held in between a tight range of USD96.69 a barrel, the daily low and a session high of USD97.03 a barrel.

A stronger U.S. dollar pressured oil prices, with the dollar index up 0.2% to trade at 80.55, the highest level since January 10.

Dollar-denominated oil futures contracts tend to fall when the dollar rises, as this makes oil more expensive for buyers in other currencies.

Oil traders now looked ahead to fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of oil demand in the world’s largest oil consumer.

The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show crude stockpiles rose by 2.9 million barrels.

Investors were also awaiting President Obama's State of the Union speech later Tuesday for any indications of an agreement to avert automatic tax hikes and spending cuts due to take effect on March 1.

The U.S. is the world’s largest oil-consuming country, responsible for 22% of global oil demand

Market players were also cautious ahead of a meeting of Group-of-20 finance ministers in Moscow later in the week, which was likely to feature discussions on competitive currency devaluation.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for March delivery dipped 0.2% to trade at USD117.91 a barrel, with spread between the Brent and crude contracts contracting to USD21.18 a barrel.

The spread widened to more than USD23 on Monday, as ongoing concerns over a glut of oil in the Midwest pressured New York-traded futures.

London-traded Brent futures rose to a nine-month high last week amid indications of strong demand from China and lingering worries about supply disruptions due to conflict in the Middle East and North Africa.