LONDON, Feb 12: Oil prices eased on Tuesday after a strong rally the day before triggered by concerns over the possibility of a short-term squeeze on supplies of benchmark North Sea Brent.

London Brent futures fell 32 cents to $21.12 a barrel and US light crude eased 47 cents to $20.94 a barrel but dealers said markets remained panicky after a sharp jump on Monday.

Brent rocketed $1.74 in the last 90 minutes of Monday trade when dealers got wind that Royal/Dutch Shell might take all available physical Brent cargoes for March.

Dealers said Shell had told them it had demand for the entire March Brent programme, sparking panic buying among those short of Brent futures.

Stop loss (automatic) and panic short covering accounted for a large part of the buying last night but the fact that the market is not heavily down today shows that traders are still nervous, said Lawrence Eagles of brokers GNI.

After the close of trade on Monday the US government said it had struck a deal with Equiva Trading, part-owned by Shell, to deliver more than 18 million barrels into the US national strategic petroleum reserve in April.

Shell can choose to deliver the oil quickly, which dealers said looked likely given word on its plans for March Brent, or space supplies out over 14 months at an average 51,000 bpd.

Equiva’s deal comes under a Bush administration plan announced last February to fill its emergency oil reserve to capacity of 700 million barrels.—Reuters