NEW YORK (Reuters) - Oil prices fell a second day on Tuesday as worries that recent price increases may hurt demand prompted investors to sell and take profits on recent gains, moves that more than offset support from possible Middle East supply disruptions.
Sell stops were triggered in a late-session swoon as Brent crude tested below its 10-day moving average, as did U.S. gasoline and heating oil futures as front-month March contracts approached Wednesday’s expiration.
“This sell-off is nothing but profit-taking,” said Tony Rosado, options broker at GA Global Markets in New York.
Rosado added: “This rally began at $106.51 (for U.S. crude) and topped out at $109.95. Just looking at it technically, the 10-day moving average puts the next support level at $105.62 and we haven’t hit there yet.”
Analysts and traders said the string of higher finishes last week that put Brent crude’s settlement near a 10-month high above $125 on Friday had sparked concerns about the effect on global demand for oil, especially in the struggling euro zone.
Brent April crude fell $2.62 to settle at $121.55 a barrel, just above the $121.50 low and below front-month Brent’s 10-day moving average of $121.82. Brent remained on pace to post a 9 percent gain for February.
U.S. April crude fell $2.01 to settle at $106.55 a barrel, falling as low as $106.30. U.S. front-month crude was still on pace to end the month up 8 percent.
Brent’s premium to U.S. crude narrowed to $15 a barrel based on settlements, from $15.61 on Monday.
Ahead of March contract expirations on Wednesday, U.S. gasoline fell almost 2 percent, dropping nearly 9 cents, and heating oil futures closed nearly 2 percent lower.
The relative strength index (RSI) for both Brent and U.S. crude fell well below 70, after recently nearing 80. An RSI above 70 signals an overbought condition to investors watching technical indicators.
Total crude trading volumes were lackluster, with U.S. crude turnover 16 percent under its 30-day average in post-settlement trading and Brent volume only 7 percent above the 30-day average.
U.S. equities managed to edge higher on data showing U.S. consumer confidence hit a one-year high in February. But an earlier report showing U.S. durable goods orders fell the most in three years in January kept concerns that high oil prices will limit economic growth intact.
American trucks carried less tonnage in January after logging the largest increase in 13 years in December, the American Trucking Associations said, another cautionary signal regarding the economy.
U.S. gasoline demand rose last week versus the previous week, but remained 6.9 percent below the year-ago period, MasterCard said in a weekly report.
A double-digit price increase thus far in 2012 has prompted the International Monetary Fund and Group of 20 officials to flag oil as a rising threat to the global economy.
Investors across markets awaited a second tranche of liquidity from the ECB expected on Wednesday and anticipation of the liquidity infusion boosted key industrial feedstock copper to a more than two-week peak on Tuesday.
The euro climbed against the dollar but trading was choppy as news that Ireland will hold a referendum on Europe’s new German-backed fiscal treaty kept optimism contained.
Late on Monday, ratings agency Standard & Poor’s cut Greece’s long-term ratings to ‘selective default’ — reinforcing concerns about the outlook for oil demand and the euro zone economy.
Iran’s dispute with the West over Tehran’s controversial nuclear program continued to simmer, along with concerns about the threat of potential supply disruptions in the region.
Iran said on Tuesday that it expected talks with the U.N.’s International Atomic Energy Agency (IAEA) to continue. The IAEA has said that no further talks were scheduled given Iran’s unwillingness to tackle the allegations of research with military nuclear applications.
U.S. crude oil inventories rose last week, by 521,000 barrels, the industry group American Petroleum Institute said in a report released late on Tuesday, a smaller-than-expected rise.
Gasoline stockpiles fell 916,000 barrels and distillate stocks fell 3.3 million barrels, the API said.
Ahead of the API report, crude stocks were expected to have risen 1.1 million barrels, and gasoline stocks by 300,000 barrels, a Reuters survey of analysts showed.
Distillate stocks were expected to be down 500,000 barrels.
The report from the U.S. Energy Information Administration is due on Wednesday at 10:30 a.m. EST (1530 GMT).
Additional reporting by Gene Ramos, Jeffrey Kerr and Janet McGurty in New York, Claire Milhench in London and Manash Goswami in Singapore; Editing by Marguerita Choy, David Gregorio and Bob Burgdorfer