* EU foreign ministers to discuss Russian sanctions
* Libya oil output slips to 450,000 bpd
* U.S. crude stocks expected to fall 2.8 mln bbls on week
(Adds U.S. API data)
By Anna Louie Sussman
NEW YORK, July 22 Brent and U.S. crude settled
lower after a choppy trading session on Tuesday as oil supplies
remained unaffected by continuing violence in Iraq, Ukraine and
The European Union threatened Russia on Tuesday with harsher
sanctions over Ukraine following the downing of a Malaysian
Israel pounded targets across the Gaza Strip on Tuesday,
saying no ceasefire was near as U.S. and United Nations
diplomats pursued talks on halting the fighting that has claimed
more than 600 lives.
"We have events flaring up on the main screen and there are
still problems in the Gaza Strip, but the thing is, we still
don't have a supply disruption," said Gene McGillian, an analyst
at Tradition Energy in Stamford, Connecticut. "The
short-covering rebound of the previous days seems to be fading
away and the market is retreating a little."
Brent crude for September delivery fell by 35 cents
to settle at $107.33 a barrel, after swinging between $107.20
U.S. oil for August delivery fell 17 cents to settle
at $104.42 a barrel, down from a session high of $105.25.
The U.S. August contract expired on Tuesday. Its premium to
September crude rose Tuesday to a session high of $2.50,
reflecting traders' concerns about low oil inventories at the
Cushing, Oklahoma, delivery point for U.S. crude.
U.S. crude oil for September settled at $102.39, down
Brent has largely traded between $105 and $112, and U.S.
crude between $100 and $105 throughout July, after the
benchmarks peaked above $115 and $107 respectively in mid-June.
In Libya, a spokesman for the National Oil Corporation said
oil output had fallen to 450,000 barrels per day, a drop of
almost 20 percent since last week, as escalating violence has
curbed some operations.
OIL STOCKS SEEN LOWER
Oil traders will turn their focus later to weekly U.S.
commercial crude oil inventories, which are expected to have
fallen by 2.8 million barrels in the week to July 18, according
to a preliminary Reuters survey of four analysts.
American Petroleum Institute data released on Tuesday showed
that U.S. crude inventories fell just 555,000 barrels last week
to 374.7 million, as crude stocks at the Cushing, Oklahoma, hub
fell by 1.4 million barrels.
The data was released ahead of the weekly inventory report
from the U.S. Department of Energy's Energy Information
Administration (EIA) due on Wednesday.
Domestic crude stocks fell by 7.5 million barrels the
previous week, the biggest draw since January, caused by a sharp
increase in refinery activity.
Refiners in the United States are paying the highest
premiums in months for physical cargoes of coastal grades such
as Light Louisiana Sweet WTC-LLS and Mars WTC-MRS as
refiners bid for barrels.
(Additional reporting by Lorenzo Ligato in New York, Rowena
Caine in London, Jacob Gronholt-Pedersen in Singapore; Editing
by Jane Baird, Gunna Dickson, Tom Brown, Jessica Resnick-Ault
and Lisa Shumaker)