* Iran negotiations weigh on Brent
* Brent contract to flip into March
* U.S. crude stocks rise more than expected
By Jacob Gronholt-Pedersen
SINGAPORE, Jan 16 Brent crude fell below $107 a
barrel on Thursday, as expectations of more supply from the
Middle East and North Africa outweighed a large drop in U.S.
Major world powers and Iran continued to move ahead on an
interim deal that eases some sanctions on Tehran in exchange for
curbs on its nuclear programme.
"The Iran situation is a bearish factor for Brent. But still
a lot can go wrong and Iran could continue to support the market
in the long term," said Tony Nunan, oil risk manager at
Mitsubishi Corp in Tokyo.
Brent crude for February delivery was down 40 cents
at $106.73 per barrel by 0332 GMT, after settling 74 cents
lower. The contract expires Thursday.
U.S. crude rose 5 cents at $94.22, after ending up
for a third straight day on Wednesday, $1.58 higher. The
February contract expires next Tuesday following a long U.S.
Oil was supported by data showing U.S. crude oil inventories
shed 7.7 million barrels last week, compared with estimates of
600,000 barrels, the largest seven-week fall since records
The drop extended this week's gains in U.S. oil. Both
benchmarks had trended downwards since the end of December in
part due to expectations the Federal Reserve could curb its
commodity-friendly monetary stimulus programme.
"I don't think the rebound (in oil prices) is sustainable,"
said Nunan. "Both contracts will flip into March delivery in the
coming days, which is when the refinery turnaround season
starts. So refining demand should drop and inventory draws
LOT OF CRUDE AROUND
Diplomats from Iran and a group of world powers are likely
to begin talks in February on a final settlement to a long
dispute over the Islamic republic's nuclear programme. Oil
prices have been supported by Western sanctions against Iran.
Under a preliminary accord that goes into effect on Jan. 20,
Iran's oil exports are to hold at current levels of about 1
million barrels per day.
The resumption of oil production at the southern El Sharara
oilfield in Libya last week also weighed on Brent, although the
main issue is still when the blockade at Libya's eastern oil
ports will end.
On Wednesday, Libyan authorities were in negotiations with
protesters threatening to restart a blockade of El Sharara,
where protests cut output for two months last year.
Losses in oil prices were capped by further evidence of
strength in the U.S. economy. U.S. producer prices rose the most
in six months in December, while a gauge of manufacturing in New
York state jumped to its highest level in 20 months in January.
The World Bank also painted a rosier picture of the world
economy, raising its forecast for global growth for the first
time in three years.
Economic growth gives investors more reason to take on risky
assets like commodities, with the positive data also likely to
spur the Fed to forge ahead with curbing stimulus further.
"People feel more confident about the economy at the moment,
and that's supportive for oil. But the reality is there's a lot
of crude around," said Nunan, referring to a continued surge in
U.S. oil output.
(Reporting by Jacob Gronholt-Pedersen; Editing by Joseph