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UPDATE 9-U.S. oil slides for 2nd straight day; spread widens
October 30, 2013 / 5:46 AM / 4 years ago

UPDATE 9-U.S. oil slides for 2nd straight day; spread widens

* Higher-than-expected oil inventory build weighs on U.S. crude

* Libya exports in focus as down to 10 pct of capacity

By Jeanine Prezioso

NEW YORK, Oct 30 (Reuters) - U.S. oil futures extended their move lower for a second consecutive day on Wednesday after government data showed large inventory builds, further widening the domestic oil’s discount to international benchmark Brent.

Disruptions to Libyan oil exports have cut supplies to Europe and Asia while supporting Brent prices.

The divergent courses of the North American and international oil markets boosted Brent’s premium over the U.S. benchmark to more than $13 a barrel.

The U.S. Energy Information Administration reported a sharp 4.1-million-barrel rise in crude stocks in the United States. Supplies at the Cushing, Oklahoma, U.S. oil storage hub rose 2.2 million barrels, their third straight weekly rise.

Brent crude for December delivery settled 85 cents higher at $109.86, after touching a one-week high of $110.16.

Stronger gasoline prices also underpinned Brent. U.S. gasoline futures settled at a one-week high, up 4.10 cents at $2.6508 per gallon after a report that Irving Oil Ltd will return to service its gasoline-making unit at its 300,000 barrel per day Saint John, New Brunswick, refinery. The November RBOB contract expires at the end of trading on Thursday.

“With Brent rising and that refinery news, gasoline was more vulnerable to a little rally,” said Gene McGillian, analyst with Tradition Energy in Stamford, Connecticut.

U.S. crude settled at a more than one-week low, down$1.43 per barrel to $96.77, having hit an intraday low of $96.59.

The discount of West Texas Intermediate (WTI) - the U.S. oil grade that underpins the benchmark oil futures contract - to Brent expanded to $13.36 a barrel. It settled $2.28 higher at $13.09.

Analysts are calling for the spread to narrow as U.S. refineries emerge from maintenance season, which has slowed domestic demand for crude.

“The widening spread will encourage refiners to return to production and eventually narrow the spread,” said Bill O‘Grady, chief market strategist at Confluence Investment Management in St. Louis.

Speculators cut their net long U.S. crude futures and options positions in the week to Oct. 15, the U.S. Commodity Futures Trading Commission said on Wednesday.

FED, IRAN, LIBYA IN FOCUS

While U.S. oil prices sank, Brent prices were supported by weekend reports of a sharp drop in Libya’s crude oil exports, as protests halted operations at ports and fields.

Italian energy major Eni, the biggest foreign producer in Africa, cut its production outlook for 2014 due to supply cuts in Libya and Nigeria.

The U.S. Federal Reserve said on Wednesday it would continue its $85 billion of monthly asset purchases for the time being, underpinning oil prices.

Investors will also keep an eye on a series of technical and diplomatic meetings on Iran’s nuclear program, which could pave the way for an easing of sanctions on Iranian oil exports.

Any increase in Iranian oil exports may take some time, however, while the U.S. Senate is debating fresh sanctions aimed at further curbs of the country’s oil sales, an influential senator said.

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