* Fire at Lemont, Illinois refinery boosts gasoline
* China HSBC flash PMI hits 7-month high in Oct
* Libyan oil exports cut next month
By Jeanine Prezioso
NEW YORK, Oct 24 U.S. oil futures recouped
losses in choppy trade on Thursday while European Brent crude
slid, as traders bet that an abrupt slump earlier this week in
the hotly traded Brent-WTI spread had gone too far.
U.S. gasoline prices led the oil complex higher, rebounding
from near their lowest since June 2012 after an overnight fire
shut down a key refinery near Chicago. Although fuel stocks are
relatively high, the unplanned outage threatens to tighten
supplies at a time when many refineries are shut for work.
Dealers were also focused on ructions in the spread between
U.S. West Texas Intermediate (WTI) and Brent futures, which hit
a six-month high of more than $13 a barrel midday on Wednesday
before snapping back to around $10 on Thursday.
"Really that spread just got too far too fast," said Richard
Ilczyszyn, chief market strategist and founder of iitrader.com
LLC. "It can't sustain that width. When the spread widened out
we faded the rally and sold it."
The U.S. crude oil benchmark snapped three sessions
of losses and ended the day 25 cents higher at $97.11 a barrel,
after touching a four-month low of $95.95.
U.S. crude oil prices have been declining for the last three
sessions on rising supply. Oil inventories last week hit the
highest level since June, according to government data. But
traders said the spread had gone too far, given the likely
pick-up in demand as refiners return from maintenance.
Brent crude oil ended 81 cents lower to $106.99 a
barrel, a fresh two-month settlement low. Brent's premium over
U.S. oil narrowed by as much as $1.13 per barrel to
$9.81, in intraday trade, almost touching the 200-day moving
average of $9.77. It settled at $9.88.
CITGO PLANT PERKS GASOLINE
In the oil products market, U.S. gasoline futures rebounded
off 16-month lows following news of a fire at the crude unit of
Citgo's 174,5000 barrel per day Lemont, Illinois refinery.
High stockpiles following a summer of strong runs by
refineries and the seasonal drop in demand have weighed on
"One of the things we haven't really seen during refinery
maintenance is problems with refineries," said Gene McGillian,
analyst with Tradition Energy in Stamford, Connecticut.
RBOB gasoline futures also reversed three days of
losses and gained 3.73 cents to end at $2.5896 a gallon after
dipping to fresh 16-month low of $2.5417 earlier in the session.
Heating oil traded down to a three month-low of $2.8974 a
gallon and settled the day 2.3 cents lower at $2.9003.
Lingering uncertainty over the future of Scotland's
Grangemouth refinery lent some support to Brent. Union leaders
said they had accepted demands from Switzerland-based Ineos that
may help avert closure of the refinery and nearby petrochemical
Grangemouth, which supplies most of Scotland with fuel,
provides steam to a plant that processes Forties, the largest
crude oil stream underpinning Brent futures.
The oil market was also eyeing talks between the United
States and Iran, to see when and if sanctions might be lifted.
Washington described last week's negotiations as the most
serious and candid to date, and the parties have agreed to meet
again in Geneva on Nov. 7-8.
Any relaxation of the sanctions against OPEC member Iran
could push down oil prices.
Continued concerns over Libyan supply also stemmed losses in
Brent. Libya does not plan to export crude oil from its eastern
Brega port in November after a fall in production from power