* U.S. crude dips, Brent volumes surge
* Focus on China economic data due this week
* Coming up: EIA oil stocks data 10:30 a.m. EST Wednesday
(Adds API data, updated trading volumes, paragraphs 9,11-14,16)
NEW YORK, Jan 8 Brent crude rose in heavy
trading on Tuesday and U.S. crude dipped as the beginning of the
annual rebalancing of a key commodities index widened the spread
between the two contracts.
Brent's premium to the U.S. West Texas Intermediate
benchmark widened by more than 50 cents, with players citing the
start of the annual reweighting of the S&P GSCI commodity index,
one of two leading indices for investors.
The rebalancing, announced in early November, will increase
the index's holdings of Brent and reduce its holdings of WTI as
the output of Brent-related grades wanes and U.S. crude output
surges. The passive index rolls its commodity holdings between
the fifth and ninth trading days of each month.
"I know that they (the GSCI) are pulling some of the WTI and
going into Brent as we're well supplied here," said Richard
Ilczyszyn, chief market strategist of iitrader.com LLC in
The U.S. Energy Information Administration (EIA) said on
Tuesday that domestic production should jump 25 percent through
2014 as rapid improvements in horizontal drilling and hydraulic
fracturing technology boost production from shale deposits.
Brent crude rose 54 cents to settle at $111.94 a
barrel, off earlier highs of $112.47 a barrel. U.S. crude fell 4
cents to settle at $93.15 a barrel.
The activity widened Brent's premium to U.S. crude to $18.79
a barrel after closing Monday at $18.21 a barrel.
The spread had narrowed from over $23 a barrel in
mid-December ahead of the start of the Seaway pipeline expansion
this week, which is expected to alleviate a glut of crude at the
Cushing, Oklahoma, delivery point for the U.S. futures contract
by sending more oil to the Gulf Coast refining hub.
Brent crude volumes surged, up 45 percent above the 30-day
average. U.S. crude trading was near flat to its 30-day average.
Colder weather in the Northern Hemisphere helped push U.S.
heating oil futures up about 1 percent, while gasoline
futures posted smaller gains.
U.S. OIL INVENTORIES
U.S. crude stocks rose 2.4 million barrels last week,
according to the weekly inventory report from industry group the
American Petroleum Institute (API), released on Tuesday after
settlement prices had been posted.
Crude stocks at Cushing rose 332,000 barrels, the API said.
Gasoline stocks rose 7.9 million barrels and distillate
stocks rose 5.9 million barrels, the API data showed.
Crude stocks were expected to be up 1.5 million barrels,
with gasoline stocks seen rising 2.3 million barrels and
distillate inventories expected to have risen 2.0 million
barrels, according to a Reuters analyst survey.
Inventory reports released last week showed a steep drop in
U.S. crude stockpiles at the end of the year, tied to refiners
cutting imports to draw down inventories on the Gulf Coast for
end-year tax purposes.
The EIA's weekly inventory report is due on Wednesday at
10;30 a.m. EST (1530 GMT).
Investors were also anticipating trade data from China
later in the week, seeking confirmation the world's No. 2 oil
consuming nation is reviving the pace of economic growth.
Trade numbers due on Thursday from China may show export
growth rebounded from three-month lows in December, although
weak demand in the United States and Europe, the country's two
biggest customers, may temper the improvement.
"There are now very clear indications that this slowdown has
come to an end," Credit Suisse analysts said in a report.
"The latest leading economic indicators show that global
growth is gaining again - particularly in key commodity
consuming countries such as China and the U.S."
European Central Bank policymakers will meet on Thursday and
economists polled by Reuters were split on whether the bank
would cut rates in 2013 after the regional economy shrank for
three straight quarters last year.
(Reporting by Robert Gibbons and Matthew Robinson in New York,
Peg Mackey in London and Ramya Venugopal in Singapore; Editing
by David Gregorio and Andre Grenon)