UPDATE 11-Brent ends above $116 to 3-month high on tight supply

Wed Aug 15, 2012 3:55pm EDT

Related Topics

* U.S. crude stocks fall more than expected - EIA data
    * ECB to flesh out plans on stability - Draghi
    * Coming up: U.S. weekly jobless claims on Thursday

 (Updates with settlements, market activity, adds analyst quote)
    By Gene Ramos
    NEW YORK, Aug 15 (Reuters) - Brent crude oil futures closed above $116 a
barrel at the highest level in more than three months on Wednesday, as a sharp
drawdown in U.S. crude stockpiles and expectations for lower North Sea oil
output painted a tighter supply picture on both sides of the Atlantic.
    Fears of supply disruptions as Middle East tensions festered, as well as
hopes for further stimulus from major central banks to support the weakening
global economy, added lift to oil futures. 
    U.S. crude oil inventories dropped 3.7 million barrels last week, the third
straight week of drawdowns, according to the U.S. Energy Information
Administration. A Reuters poll of analysts had forecast a decline of just 1.7
million barrels. 
    A steep drop in U.S. gasoline stocks due to a series of refinery outages
lifted gasoline futures to their highest intraday level since May, gaining 
nearly 3 percent to lead the petroleum complex. 
    While the crude stock draw was larger than expected, "more importantly, we
see the large dip in gasoline stocks ready to push us higher into the second
half of summer," said Carl Larry, president of Oil Outlooks in New York.
    In London, September Brent crude posted a session high at $116.72 a
barrel and closed at $116.25, up $2.22 or nearly 2 percent. It was the highest
settlement for front-month Brent since May 2.
    U.S. September crude oil settled at $94.33 a barrel, gaining 90
cents, the highest settlement for front-month U.S. crude since May 14, after
hitting a session high of $94.90.
    U.S. gasoline stocks fell 2.4 million barrels last week, greater than the
1.5-million-barrel drop predicted. The four-week average demand for refined
products in the United States rose to 19.3 million barrels per day, the highest
since early September 2011, the EIA data showed. 
    U.S. September gasoline closed at $3.0840 a gallon, rising 8.26
cents, the highest settlement for front-month RBOB since May 1. U.S. September
oil futures settled at $3.0852 a gallon, gaining 5.06 cents, the highest
close for front-month heating oil since May 3.  
    Brent crude oil's premium to U.S. crude climbed to $21.92 at settlement,
from $20.60 on Tuesday, marking the highest level since Oct. 21 last year,
squeezed by maintenance in North Sea production on which the benchmark's price
is calculated. The premium rose to an intraday high of $22.12. CL-LCO1=R 
    "It's back to the Brent/WTI spread trade, with it stretching back above $22
intraday," said Richard Ilczyszyn, chief market strategist at iiTrader.com in
Chicago.
    Ilczyszyn noted increased political risk with news Wednesday from the Saudi
state news agency that Saudi Arabia had ordered its citizens to leave Lebanon
immediately. The agency issued an alert, but did not  elaborate. 
    The pace of trading further picked up, raising Brent's total trading volume
to 20 percent above its 30-day average and U.S. crude dealings rose 34 percent
above its 30-day average, Reuters data showed.
    Overbought signals persisted for Brent, with the 14-day Relative Strength
Index (RSI) rising to above 76, according to Reuters data. U.S. crude's RSI was
near 64, up for a third straight day. 
    
    STIMULUS WATCH
    European Central Bank President Mario Draghi has said that the ECB will
flesh out plans to bring some stability back to the strained euro zone bond
markets early next month, driving hopes the bloc could start to right itself
again in the second half of the year.
    China was also expected to address weakening growth levels, with
expectations that it would launch more infrastructure projects, a move that is
expected to raise demand for metals and energy.
    In the U.S., consumer prices were flat in July for a second straight month
and the year-over-year increase was the smallest in more than 1-1/2 years,
giving the Federal Reserve room to ease policy further to tackle high
unemployment. 

 (Additional reporting by Robert Gibbons in New York, Manash Goswami and
Elizabeth Law in Singapore; Editing by Marguerita Choy and Alden Bentley)
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