* U.S. crude stocks fell 3.4 mln bbls last week -EIA
* Cushing crude stocks fell 321,000 barrels last week -EIA
* U.S. distillate stocks up 2.01 mln bbls last week -EIA
(Adds Cushing data, Brent/U.S. crude spread, paragraphs 7-9)
By Robert Gibbons
NEW YORK, June 4 Brent and U.S. crude ended
lower on Wednesday as hopes that a peace plan from Ukraine's
president-elect might help ease the crisis with Russian
separatists cooled oil's earlier rally.
Rising U.S. distillate stockpiles and weak distillate profit
margins in Northwest Europe also helped trigger the reversal by
Brent crude for July delivery fell 42 cents to
settle at $108.40 a barrel. Brent settled back above the 100-day
moving average of $100.32, but fell as low as $108.25 in
U.S. July crude dipped 2 cents to settle at $102.64,
after rising as high as $103.69 immediately after the release of
U.S. oil inventory data that showed crude oil stocks fell last
"There was short-covering ahead of the data, but some
selling afterward, and the Ukraine news also helped trigger some
selling," said Bill Baruch, senior market strategist at
iitrader.com LLC in Chicago.
The U.S. Energy Information Administration (EIA) said U.S.
crude stocks fell by 3.4 million barrels last week as imports
dropped, a bigger slide than the expected 300,000-barrel draw
and also bigger than the inventory drop that was reported by an
industry group on Tuesday.
Crude stocks at the Cushing, Oklahoma, delivery point of the
U.S. crude oil contract, also fell, declining 321,000 barrels.
Falling Cushing stocks have been supportive to U.S. crude
prices and helped trim Brent's premium to U.S. crude. The spread
between the two contracts CL-LCO1=R narrowed to $5.76 on
Wednesday based on settlements.
Brent's premium to U.S. crude fell to $5.69 during the
session, the narrowest spread since April 15.
U.S. distillate inventories, including diesel and heating
oil, rose 2.01 million barrels, the EIA said, much more than the
400,000-barrel build that had been expected. Gasoline stocks
also rose, by 210,000 barrels.
Also weighing on distillate futures, diesel refining margins
in Europe have dropped to a four-year low below $10 a barrel,
pressured by Russian and U.S. exports.
"U.S. crude's bullish response to the supportive EIA report
proved to be short-lived as heavy product markets ultimately
weighed on crude values," said Jim Ritterbusch, president at
Ritterbusch and Associates in Galena, Illinois.
U.S. July heating oil fell 1.77 cents to settle at
$2.8481 a gallon after sliding to $2.8470. U.S. July gasoline
fell 1.35 cents to settle at $2.9444 a gallon.
Ukrainian President-elect Petro Poroshenko said it was
possible he would meet Russian leader Vladimir Putin at
commemorations in France this week marking the anniversary of
the World War Two D-Day landings.
Poroshenko said a peace plan he is working on to end violent
clashes between separatists and government forces in Ukraine
would include decentralization of power, a wide amnesty, and
elections for local government.
(Additional reporting by David Sheppard in London and Florence
Tan in Singapore; Editing by Dale Hudson, Susan Thomas, Lisa Von
Ahn, Peter Galloway and Andre Grenon)