Brent up, US crude down, widening spread after stockpile build
By Barani Krishnan
NEW YORK (Reuters) - Benchmark Brent oil jumped 2 percent on Wednesday, rebounding from a one-month low and widening its gap to U.S. crude, which closed slightly down after a new record high for oil inventories in the United States.
It was the first positive close in Brent after five straight days of losses exacerbated by a surging dollar that made dollar-denominated commodities such as oil costlier for holders of other currencies.
While the dollar remained strong at a 12-year high against the euro EUR= on Wednesday, London-traded Brent broke free from headwinds posed by the greenback to rally on the relatively weaker fundamentals in U.S. crude.
Aside from support from market bulls who felt the $5 drop in Brent over the past five sessions was excessive, traders said the global oil benchmark could have gained from activity in crude options and the final day of monthly contract rolls for investors in USO USO, the exchange-traded oil fund.
"I believe there were a host of factors, the chief of which was buying by those defending what they believed to be a bottom for Brent. That probably sparked covering by those short on the market," said Joseph Posillico, senior vice president of energy futures at Jefferies in New York.
Brent's front-month LCOc1 settled up $1.15 at $57.54 a barrel, rebounding from a one-month low under $56. Much of the gains came in the last hour of trade, when Brent jumped almost 70 cents within seven minutes.
U.S. crude's front-month CLc1 closed down 12 cents at $48.17.
Brent's premium to U.S. crude CL-LCO1=R, a favorite spread play in oil, widened to $9.40 a barrel, after hovering at $8 and below on Tuesday, its narrowest in a month. Continued...