NEW YORK Brent October crude futures fell more than 1 percent on Friday on talk of a possible release of U.S. strategic petroleum reserves and expectations that North Sea output will rebound after maintenance curbs production in September.
Profit taking by those trading the Brent/U.S. crude spread also was a factor, a day after the Brent September contract expired at a three-month peak and Brent's premium to its U.S. counterpart having exceeded $22 a barrel this week.
Front-month U.S. September crude showed resilience, edging up in choppy trade to its own three-month high, while U.S. gasoline and heating oil futures fell sharply in tandem with Brent's decline.
Following the Brent September contract's expiration on Thursday at a three-month peak of $116.90 a barrel, October Brent pared gains in post-settlement trading on news the White House was "dusting off old plans" for a potential release of strategic oil stocks.
Brent fell more than $2 before bouncing off lows on Friday when the head of the International Energy Agency said oil markets were currently well supplied and there was no reason for governments to release oil from strategic reserves.
The front-month Brent price managed a small gain for the week, while U.S. crude posted a 3.38 percent weekly increase. It was the third straight weekly gain for Brent and U.S. crude.
North Sea production curbs in September, escalating geopolitical tensions over Syria's civil conflict and the dispute over Iran's nuclear program and hopes that central banks will provide more stimulus had combined to pull Brent up since it settled at $89.23 a barrel on June 21.
Brent October crude fell $1.56 to settle at $113.71 a barrel, after falling to $112.70 intraday. Brent managed a 76-cent weekly gain.
"The market moved a long way in quite a short time and we are now seeing some profit-taking," said Eugen Weinberg, global head of commodities research at Commerzbank in Frankfurt.
U.S. September crude rose 41 cents to settle at $96.01 a barrel in choppy trade, having reached $96.28. The settlement and intraday peak were the highest since May 11.
The North Sea production drop next month and Brent's sensitivity to Middle East disruptions pushed its premium to U.S. crude to $22.28 on Wednesday, but it ended at $17.39 on Friday, based on October settlements.
"The spread had stretched out pretty wide, so some profit taking was not unexpected as the North Sea maintenance will end and production return," said Bill O'Grady, chief market strategist at Confluence Investment Management, St. Louis.
The price premium of front-month Brent to its nearby contract also had been elevated, rising above $2 before the September contract expired. It was only 73 cents based on October and November settlements on Friday.
TAP RESERVES OR ADD TO THEM?
Britain's energy ministry said it was ready to ask the IEA to take action to deal with high oil prices, but neither it nor its partners had made any decision to release stocks.
France and the United States are in contact on recent price rises and are studying all options, an official at the offices of President Francois Hollande said.
Japan and South Korea saw no need yet for a release from reserves, government sources said.
Amid all this downplaying of the need for a reserves release, European governments are on a buying spree for crude and oil products in order to meet new European Union (EU) rules designed to mitigate the effect of a supply crisis.
An EU embargo on Iranian crude oil is in its second month, as the dispute between the West and Iran over its nuclear program drags on.
MIDDLE EAST TURMOIL
Also curbing oil's push higher, Israeli President Shimon Peres on Thursday came out against any go-it-alone attack on Iran, saying he trusted U.S. President Barack Obama's pledge to prevent Tehran from producing nuclear weapons.
But oil prices continue to find support from turmoil in Syria and the surrounding region. Refugees are fleeing Syria in ever greater numbers, U.N. agencies said on Friday, as the conflict between President Bashar al-Assad's forces and rebels intensifies.