Oil off on U.S. data but OPEC eyed as $100 in sight

NEW YORK Thu Jan 13, 2011 5:40pm EST

An employee walks past a pump jack at a PetroChina plant on the outskirts of Shenyang, Liaoning province January 13, 2008. REUTERS/Stringer

An employee walks past a pump jack at a PetroChina plant on the outskirts of Shenyang, Liaoning province January 13, 2008.

Credit: Reuters/Stringer

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Oil moves closer to $100

Tue, Jan 11 2011

NEW YORK (Reuters) - Oil slipped on Thursday as markets weighed disappointing U.S. jobless claims data and the prospect OPEC would raise output should prices break above $100 a barrel for an extended period.

A delegate from a Gulf OPEC member state said OPEC will only hold an emergency meeting if oil bursts into triple digits and stays there, although the group's Gulf members could informally add supply if needed.

Brent crude rallied to near $99 a barrel earlier this week, raising concerns it could break past $100, driving up fuel costs and threatening the fragile economic recovery.

U.S. weekly initial unemployment benefit claims showed their biggest increase in six months, suggesting that, even with recent signs of economic improvement, the labor market paints a gloomy picture for demand.

The data helped drag down stock markets, even as Federal Reserve Chairman Ben Bernanke said he was hopeful about the recent improvement in the outlook, saying he now expects the economy to expand between 3 percent and 4 percent this year.

In London, ICE Brent crude for February settled down 6 cents at $98.06 a barrel, off the day's high at $98.67. U.S. February crude ended down 46 cents at $91.40, falling as Wall Street weakened on the jobs report, after hitting a session high of $92.37.

In late post-settlement trade, Brent crude rose 36 cents to $98.48 a barrel while U.S. crude dropped $1.00 to $90.86.

The spread between the two grades widening as much as $7.66, the widest premium the London grade has held to U.S. oil since February 2009. That premium widened this week amid concerns about supplies of crude tied to Brent, the benchmark for European, Middle East, and African crudes.

Trading was volatile, after settlements hit 27-month highs on both sides of the Atlantic on Wednesday, ahead of the expiry of February Brent expiring and the release of a plethora of U.S. economic indicators scheduled on Friday.

"The (energy) complex succumbed to some weakness in equities today and a related unfavorable jobless figure while shrugging off the support of another strong pop in the euro," said Jim Ritterbusch, president at Ritterbusch & Associates, in Galena, Illinois.

EYES ON OPEC

A delegate from a Gulf OPEC member state said OPEC will only hold an emergency meeting if oil climbs above $100 and stays there, although the group's Gulf members could informally add supply if needed.

"OPEC will only have an extraordinary meeting if oil prices exceed $100 and stay there. We don't want the market to panic," the delegate told Reuters.

The prospect of oil breaking $100 a barrel, last touched in October 2008 after Lehman Brothers collapsed, has raised alarm bells about the impact of fuel costs on the economic recovery.

Top exporter Saudi Arabia has said it favors an oil price between $70 to $80 a barrel, but Libya's top oil official on Thursday said oil prices at $100 a barrel would not harm the world economy and there is no need for OPEC to hold an emergency meeting or add supplies.

ECONOMIC DATA

Economic reports showed the U.S. trade gap narrowed in November and producer prices rose more than expected in December.

U.S. Federal Reserve Chairman Ben Bernanke said the nation's economy should grow around 3 percent to 4 percent this year, a healthier clip than 2010, but not enough to bring down unemployment as much as policymakers would like.

Supply concerns from earlier in the week eased as Alaskan oil production began to rise as the state's crude pipeline resumed oil flows at 400,000 bpd, about two-thirds normal levels, after it was shut due to a leak on Saturday.

The line will shut again for 36 hours over the weekend so a bypass can be constructed to allow flows to increase to normal levels.

(Additional reporting by Robert Gibbons in New York; Claire Milhence, Dmitry Zhdannikov and Alex Lawler in London; editing by Matthew Robinson and David Gregorio)