April 17, 2012 / 4:50 AM / 7 years ago

UPDATE 9-US crude jumps, Brent lags, spread narrows

* Brent/U.S. crude spread continues to narrow

* Spanish debt auction smooth, supports oil, equities

* Coming up: EIA oil data 10:30 a.m. EDT Wednesday (Adds API data paragraphs 20-21)

By Robert Gibbons

NEW YORK, April 17 (Reuters) - Brent crude edged up on Tuesday as an upcoming pipeline reversal, aimed at alleviating oversupply in the central United States, bolstered U.S. oil futures at the expense of the higher-priced European benchmark.

A well-received Spanish debt auction and a better-than-expected German economic sentiment reading helped support Brent, added lift to U.S. crude and pushed European and Wall Street share prices higher.

Brent’s premium to its U.S. counterpart CL-LCO1=R narrowed to below $14 a barrel intraday after Monday’s news that the Seaway pipeline’s crude oil flow will be turned around toward the Gulf Coast as early as mid May.

The reversal is expected to ease a supply glut in the U.S. Midwest that has weighed on the U.S. benchmark crude price.

Also helping to stymie Brent and reduce the premium to U.S. crude were Saturday’s talks about Iran’s nuclear program. The revived discussions with Tehran and major powers eased the threat of immediate supply disruptions in the region.

The specter of a regional conflict as Iran declined to curb its disputed nuclear program helped Brent prices surge to a 2012 peak above $128 a barrel in March, a 19-percent rise from the end of 2011.

Recovering Libyan oil exports and higher output from Saudi Arabia and Iraq helped check the price surge, along with the West mulling strategic reserve releases as governments around the globe fretted about the effect of high oil prices on economic growth.

Brent June crude edged up 10 cents to $118.78 a barrel, having swung between $117.98 and $119.34.

U.S. May crude futures rose $1.27 to settle at $104.20, the highest close since April 2, after reaching $105.07. The May contract expires on Friday.

The spread unwinding came as total Brent crude trading volume slightly outpaced U.S. crude turnover. Volume was above the 30-day average for both contracts.

“The Brent-WTI unwind is the primary feature today,” said John Kilduff, partner at Again Capital LLC.

“The Spain debt saga is also helping as is the IMF economic growth outlook revision.”

Global growth is slowly improving as the U.S. recovery gains traction and dangers from Europe recede, though risks remain in a fragile situation, the International Monetary Fund said in its world economic outlook on Tuesday.

U.S. RBOB gasoline futures ended 1 percent lower, while heating oil managed a penny gain.

“I think it’s the big unwind of two markets, Brent and RBOB, that were out of proportion to the rest of the complex,” said a New York-based broker.

U.S. gasoline demand last week fell 6.8 percent from a year ago as high prices and rising fuel efficiency pressure consumption, MasterCard said in a weekly report.


While the resumption of negotiations between Iran and the five permanent U.N. Security Council members and Germany helped temper fears of regional supply disruption, the possibility remains that the talks will get derailed again.

The United States intends to maintain sanctions and other pressure on Iran as Tehran considers what it will bring to the table in the next round of talks.

Iran’s foreign minister was quoted earlier as saying his country was ready to resolve all nuclear issues if the West started lifting sanctions.


U.S. crude oil stocks rose 3.4 million barrels last week, more than expected, the weekly report from industry group the American Petroleum Institute showed.

Gasoline stocks fell 2.6 million barrels and distillate stocks fell 2.4 million barrels, the API said.

Ahead of the API report, U.S. oil inventories were expected to have risen 1.4 million barrels last week, according to a Reuters survey of analysts.

Distillate inventories were expected to have slipped 200,000 barrels, while gasoline stocks were seen down 900,000 barrels.

The government’s report from the U.S. Energy Information Administration will follow on Wednesday at 10:30 a.m. EDT (1430 GMT). (Additional reporting by Gene Ramos in New York, Julia Payne and Christopher Johnson in London and Jessica Jaganathan in Singapore; Editing by Bob Burgdorfer and Alden Bentley)

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