* Cyprus parliament rejects deposit tax for bailout
* Alleged chemical attack in Syria
* U.S. crude stocks fell 413,000 barrels last week-API
* Coming Up: U.S. EIA fuel stocks data at 10:30 a.m. EDT
(Adds API data, paragraphs 17-21)
By David Sheppard and Joshua Schneyer
NEW YORK, March 19 Brent crude oil fell 2
percent to a three-month low under $108 a barrel on Tuesday as
uncertainty over a bailout for Cyprus raised concern about the
euro zone debt crisis and its impact on energy demand.
Cypriot lawmakers overwhelmingly rejected a deeply unpopular
tax on bank deposits on Tuesday, throwing into doubt an
international bailout for the troubled euro zone member, needed
to avert default and a banking collapse.
The tax proposal, announced over the weekend as a condition
of the bailout, has renewed investor concern about the euro
zone's ability to tackle its debt crisis, causing stock markets
and oil prices to fall this week. Gold and other safe haven
"The situation in Cyprus, although small, goes to show that
the problems in the EU are far from over and it will exacerbate
declining demand," said Natixis analyst Abhishek Deshpande in
Brent crude for May delivery touched a three-month
low of $107.25 and settled down $2.06, or 1.88 percent, at
$107.45 a barrel.
U.S. crude for April delivery settled down $1.58 at
$92.16 a barrel.
The spread between the two leading global oil benchmarks,
Brent and West Texas Intermediate (U.S. crude) contracted to
$14.61 at one point during Tuesday's trading, the narrowest
level since mid-January CL-LCO1=R.
The U.S. dollar firmed by 0.3 percent against a basket of
foreign currencies. A stronger greenback can help to
weaken oil since the dollar-denominated commodity becomes more
costly for holders of other currencies.
The result of the vote in Cyprus could also affect oil if it
causes a swing in exchange rates, said Tony Machacek, an oil
futures broker at Jefferies Bache in London.
"If the euro makes a dramatic move, it will influence oil,"
The single currency was down by 0.6 percent against the
dollar and traded below $1.29 for the first time since December.
For a 24-hr Brent chart analysis:
For a 24-hr chart analysis on oil:
Thomson Reuters Global Markets Forum:
Iran still presents an element of risk that could limit
losses in oil markets regardless of the outcome of the vote in
Cyprus, said Thorbjoern Bak Jensen of Global Risk Management.
Europe and the United States last year imposed tough new
sanctions aimed at Iran's oil trade to force Tehran to the
negotiating table over its nuclear programme.
Insurers have refused to cover Indian refineries that
process Iranian crude imports, which may halt
But China's biggest refiner said on Tuesday it did not
expect to have any insurance problems and planned to use more
Iranian oil in 2013.
Additionally, oil traders were watching Syria, where the
government and rebels accused each other of launching a deadly
chemical attack on Tuesday in what would, if confirmed, be the
first use of such weapons in the two-year conflict.
Investors looked ahead to the weekly release of U.S. oil
inventory data at 10.30 a.m. EDT (1430 GMT) on Wednesday from
the U.S. Energy Information Administration.
Analysts polled by Reuters expected the data to show total
U.S. crude inventories rose by 2 million barrels last week on
lower refinery utilization, while gasoline stocks were seen
falling by 2.1 million barrels.
U.S. fuel stocks data released by industry group the
American Petroleum Institute (API) late on Tuesday showed U.S.
crude stocks fell by 413,000 barrels last week.
The API said crude oil stocks at the WTI delivery point of
Cushing, Oklahoma, fell by 289,000 barrels.
Oil prices were little changed in after-hours electronic
trading following the release of the API numbers.
(Additional reporting By Dasha Afanasieva and Jessica Donati in
London and Florence Tan in Singapore; Editing by William Hardy,
Jason Neely, Bob Burgdorfer, David Gregorio and Nick Zieminski)