U.S. crude oil prices fell more than 40 cents a barrel Thursday on signals that recently tight supplies of North Sea Brent crude were easing.
North Sea Brent prices, which have risen almost $4 a barrel in the past two weeks on talk that the market had been cornered, fell 85 cents a barrel.
"The Brent squeeze is coming to an end," said John Lichtblau, president of Petroleum Industry Research Foundation. "It has been like Atlas, holding up the market all by itself. That factor is going away now."
North Sea Brent is the most widely traded grade of international oil and changes in its market have a ripple effect throughout international crude markets.
The fall in Brent prices spilled over into the U.S. market where the chief American grade of oil, West Texas Intermediate, dropped 43 cents a barrel to $17.30 for oil delivered in February.
The day's decline was a reversal of recent sessions which saw U.S. crude prices jump almost $3 a barrel to a recent high of $17.90 a barrel.
"The Brent squeeze factor transmitted to WTI (West Texas Intermediate), but now it is being perceived as dissolved," Lichtblau said. Otherwise, he said, crude prices would have been much stronger given frigid air that is enveloping the Eastern seaboard.
A single trading company had been holding as much as 30 cargoes of January North Sea Brent crude and offered to sell them at prices above what most buyers were willing to pay, traders said.
The trading company reportedly is stuck with many unsold cargoes and is now said to be shipping them to its own storage or refining facilities.
Traders said renewed talk of price discounting by OPEC members also added selling pressure to an already fragile market.
In addition, U.S. crude prices fell because of technical selling touched off by weakness in Brent prices, analysts said.
"The technical breakdown in crude dragged heating oil along with it," said Jerry Samuels, a broker at E. F. Hutton & Co. "But if not for heating oil, crude would have moved even lower."
February heating oil futures closed 0.31 cent above the previous close to end at 53.79 cents a gallon, bringing the gains since Monday to 3.8 cents a gallon.
Analysts said expected revisions in world oil demand statistics by the International Energy Agency in Paris on Monday may help boost crude prices temporarily, although much of that information already has been discounted.