October 12, 2012 / 4:51 AM / 5 years ago

UPDATE 9-Brent falls $1/bbl, spread to U.S. crude narrows

* IEA cuts 2011-2016 global oil demand growth
    * Turkey-Syria tensions, lower N. Sea output support
    * Brent/U.S. crude spread narrows from 2012 peak

 (Updates with closing prices, background, CFTC data)
    By Robert Gibbons
    NEW YORK, Oct 12 (Reuters) - Brent crude prices fell more
than $1 a barrel on Friday, outpacing losses on U.S. crude and
deflating the spread between the two contracts after it hit the
widest level in a year this week. 
    Expectations of a looser market weighed on prices after a
report by the International Energy Agency's (IEA) forecast
higher supplies and declining oil consumption after concerns
about North Sea oil supplies and Middle East tensions supported
Brent for most of the week. 
    Brent and U.S. crude posted weekly gains of around 2 percent
as turmoil in the Middle East, especially t ensions on the border
between Sy ria a nd Turkey, in tensified a nd Eu rope continued to
grapple with its debt crisis.
    Money managers raised their net long positions during the
week by over 7,000 contracts to top 196,000 during the week.
    Oil markets have been balancing expectations of weaker fuel
demand due to the struggling global economy against the risk of
output disruptions from the Middle East in recent weeks. 
    Brent November crude fell $ 1 . 09 to settle at $ 114 . 62 
a barrel, while U .S. crude f or November delivery traded
down 21 c ents to settle at $91.86 a barrel. 
    Friday's move s narrowed Brent's premium to U.S. crude
benchmark West Texas Intermediate CL-LCO1=R t o below $ 23 a
barrel after it hit $2 3.69 on Thursday, the highest since
October 2011.
    Brent's premium to U.S. crude rose more than $8 a barrel
since falling to $15.57 a barrel on Sept. 19 as the European
benchmark was squeezed by lower North Sea output.
    November output of crude from the four crude stream
underpinning the Brent crude benchmark -- Brent, Forties,
Oseberg and Ekofisk, wa s expected to average 780,000 barrels per
day, down from 871,000 bpd in October and close to September
lows of 720,000 bpd. [I D:nL6E8LBE0X]
    The Brent/WTI spread narrowing was "reflecting possible
profit-taking in the Brent-WTI spread after it earlier rose to
its highest level in a year," Addison Armstrong, senior director
at Tradition Energy, said in a note.
    One trader said some investors in the spread play were
booking profits ahead of the weekend, with so much uncertainty
hovering over the market.
    Tension between Turkey and Syria continued to build on
Friday as Turkey scrambled two fighter planes to the border with
Syria after a Syrian military helicopter bombed the Syrian
border town of Azmarin. 
    Fighting along Turkey's border with Syria has repeatedly
spilled over into Turkish territory in the past week.
    The European Union (EU) provisionally approved new economic
sanctions against Iran over Tehran's nuclear program, with
senior diplomats giving their backing to measures against Iran's
banking sector and industry. 
    The IEA said that Iran's oil production has fallen to the
lowest in more than two decades, with the decline attributed to
Western sanctions. 
    U.S. gasoline and heating oil futures fell,
with gasoline retreating more than 2 percent and testing support
below $2.8790 a gallon, its 100-day moving average, a technical
level monitored by chart-watching traders and analysts.
    Heating oil futures fell more than 1 percent, but was
retreating from a seven-month peak above $3.26 a gallon on
    U.S. distillate stocks, which include diesel and heating
oil, fell by 3.2 million barrels last week, the Energy
Information Administration reported, far more than expectations.
    Total U.S. distillate inventories are now 33 percent below
the level of last October as refinery closures and higher
exports have cut into domestic supplies. 
    The IEA cut its global oil demand growth projection for
2011-2016 by 500,000 bpd compared with its previous report,
easing the pressure on OPEC to produce more oil. [ID:
    The agency also cut its 2013 global oil demand projection by
100,000 bpd to 90.48 million bpd, citing lower consumption in
Europe, the Americas and China.    
    "It seems like the market has reacted on the negative side.
Crude oil prices reversed from yesterday's gains amid concerns
over confirmation of the global oil demand growth," said Myrto
Sokou, a senior research analyst at Sucden Financial.

 (Additional reporting by Alice Baghdjian in London and Florence
Tan in Singapore; Editing by David Gregorio, Sofina Mirza-Reid
and Marguerita Choy)
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