February 7, 2012 / 3:56 AM / 8 years ago

Oil rises on spread trade, Canadian outage

NEW YORK (Reuters) - Brent oil rose slightly on Tuesday and U.S. crude jumped more than 1.5 percent, bolstered by an unplanned outage at a Canadian oil sands plant and optimism about an agreement on Greece’s debt problems.

A driver refuels his car at a gas station in Milan November 8, 2011. REUTERS/Alessandro Garofalo

An Alberta plant that processes Canadian oil sands was expected to be shut for two or three weeks, adding lift for U.S. crude and helping narrow its deficit to Brent.

Brent’s premium to U.S. crude oil widened in early trade to more than $20 per barrel, its highest since October, before a brief but sharp reversal by Brent and a rally by the U.S. contract narrowed the spread back below $18 and left it at $17.82 based on settlements.

“The spread got above $20 and it looks like some big players came in and pulled it back, then the dollar fell on expectations a Greece debt deal is coming,” said Chris Dillman, analyst at Tradition Energy in Stamford, Connecticut.

Before the start of open outcry floor trading in New York, Brent surged to a six-month peak above $117 due to Europe’s severe cold snap and fears that Iran would halt exports to the European Union in advance of the EU’s embargo set for July.

U.S. crude prices had been restrained by rising domestic stocks and tepid demand revealed in government data, even as recent jobs reports painted an improving picture more supportive to oil.

Brent March crude rose 30 cents to settle at $116.23 a barrel, a sixth straight higher close, having traded from $115.60 to $117.50, its highest intraday price since August 2.

During its rally above $117, Brent’s Relative Strength Index reached 70, which signaled an overbought condition for investors who watch technical indicators.

U.S. March crude rose $1.50 to settle at $98.41 a barrel, having swung from $95.84 to $99.13.

Total crude futures trading volume was heavy, especially for the U.S. contract. U.S. turnover exceeded 1 million lots and was 93 percent above the 30-day average, while Brent turnover was 39

percent above its 30-day average.

Dollar-denominated commodities also found support as the euro rallied across the board, hitting an eight-week high against the greenback on optimism that Greece is about to agree on a bailout deal that will enable it to avoid a messy default.

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Graphic on Brent-WTI spread: link.reuters.com/syb56s

Graphic on Brent technicals: r.reuters.com/qyb56s

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IRAN AND NIGERIA

Iran’s parliament said it was ready to impose a ban on oil exports to the EU, the Iranian Press TV reported, ahead of a ban announced by the EU slated to begin on July 1.

Clashes in Nigeria are also worrying investors about potential supply disruptions after a Sunday attack on a pipeline belonging to Italy’s Eni (ENI.MI) and Tuesday’s bombing of an army barracks.

EIA UPS DEMAND VIEW

The U.S. government’s Energy Information Administration (EIA) boosted its 2012 and 2013 forecasts for global oil demand growth and said supply would tighten as gains in non-OPEC production lag, adding to support for oil prices.

U.S. gasoline demand last week fell more than 5 percent for the third straight week compared with year-ago levels, according to a separate report from MasterCard, with demand down 2.8 percent from the previous week.

U.S. OIL INVENTORIES

U.S. commercial crude oil stockpiles fell 4.5 million barrels last week, according to a weekly report from industry group the American Petroleum Institute, against forecasts supply would have risen. <API/S>

Gasoline stocks rose 4.4 million barrels and distillate stockpiles increased by 386,000 barrels, even with a drop in product imports.

Ahead of the inventory report, U.S. crude oil stocks were expected to be up 2.4 million barrels, a Reuters survey of analysts showed.

Gasoline stocks were estimated to be up 700,000 barrels and distillate stockpiles were expected to have dipped by 700,000 barrels, the survey said.

The EIA’s report follows at 10:30 a.m. EST (1530 GMT) on Wednesday.

Additional reporting by Gene Ramos in New York, Yeganeh Torbati in London and Manash Goswami in Singapore; Editing by Bob Burgdorfer, Alden Bentley, Lisa Shumaker and Dale Hudson

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