CORRECTED-UPDATE 10-Brent dips, US crude rises on fiscal talks

Mon Dec 17, 2012 4:43pm EST

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(Corrects volume of Seaway pipeline expansion in paragraph 2)
    * Optimism on U.S. budget talks lifts equities, supports oil
    * Coming up: API oil data 4:30 p.m. EST Tuesday

    By Robert Gibbons and Matthew Robinson
    NEW YORK, Dec 17 (Reuters) - Brent crude prices dipped on
Monday while U.S. oil futures rose as news of a key U.S.
pipeline expansion will be completed next month and optimism
about a deal to avoid the "fiscal cliff" prompted spread trading
between the two contracts.
     The discount of U.S. crude to the international Brent
benchmark narrowed by $1 following news that Enterprise Products
Partners LP and partner Enbridge Inc would
complete a 250,000 barrel per day (bpd) expansion to the 150,000
bpd Oklahoma to Texas Seaway pipeline in early January, when it
will have capacity to ship 400,000 bpd. 
    The increased capacity will allow more crude to the Gulf
Coast from the Cushing, Oklahoma delivery point for the U.S. oil
futures contract, where a glut of oil from rising Canadian and
U.S. flows has depressed domestic prices relative to coastal and
international prices. 
    Further support for U.S. crude came after President Barack
Obama and Republican House Speaker John Boehner met for talks to
resolve the U.S. budget crisis. Equities markets also rose on
the optimism around the discussions, which have held sway over
oil markets for weeks amid trader concern failure to reach a
deal could cause a recession and damp fuel demand.
    "Hopes for a budget deal have the equities market putting in
a good day and U.S. crude has followed along," said Addison
Armstrong at Tradition Energy in Stamford Connecticut, adding
the "outlook for pretty weak economies in Europe have helped
limit Brent." 
    Brent crude futures fell 54 cents to settle at
$107.64 a barrel. Brent hit a 2012 high of $128 in March and is
on course to end the year little changed in percentage terms as
economic worries have countered price-supporting supply
disruptions in the Middle East and other regions such as the
North Sea.    
    The front-month U.S. January crude rose 47 cents to
settle at $87.20 a barrel, with prices finding some resistance
after briefly topping the 50-day moving average at $87.66 a
barrel.
    Tempering enthusiasm about the U.S. economy, the New York
Federal Reserve said in a report released on Monday that
manufacturing in New York State declined for a fifth straight
month in December and the labor market remained weak.
 
    U.S. gasoline futures briefly traded higher on news of a
small fire at Motiva Enterprises' 325,000
barrel-per-day crude unit at the Port Arthur, Texas, refinery.
The company said it was still targeting full restart of the
unit, which was shut due to pipe problems earlier in the year,
for early 2013. 
    Traders were also awaiting weekly U.S. inventory data from
the American Petroleum Institute and U.S. Energy Information
Administration, due out on Tuesday and Wednesday, respectively,
for market direction. 
    A Reuters poll of analysts forecast the data would show a
drawdown in crude oil stocks last week as refiners ran down
inventories for end-year tax purposes, while fuel stockpiles
were expected to show a corresponding build. 
    
    

 (Reporting by Robert Gibbons and Matthew Robinson in New York;
Alex Lawler in London and Florence Tan in Singapore; editing by
Sofina Mirza-Reid and Alden Bentley)
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