UPDATE 9-US oil vaults above $99 on Middle East worry, spread trade

Tue Jul 2, 2013 4:39pm EDT
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* U.S. crude hits 9-month high

* U.S. September-October crude spread widens to record high

* Brent-WTI spread falls to narrowest since January 2011

* Coming up: EIA weekly oil data 14:30 GMT

By Anna Louie Sussman

NEW YORK, July 2 (Reuters) - U.S. crude jumped to a nine-month high above $99 a barrel on Tuesday as turmoil in the Middle East unsettled investors, while signs of tightening supply in the U.S. Midwest strengthened prompt U.S. crude prices relative to other contracts.

The spread between European Brent and U.S. WTI crude for September narrowed to less than $4 a barrel, the lowest since early 2011, as some traders rushed to cover short bets. Goldman Sachs closed its trade recommendation after the spread on the August contracts collapsed from over $23 in February to go well below its target of $5.

U.S. inter-month spreads stretched to their widest in years, with the Sept/Oct WTI spread jumping at one point to a record high of $1.24, up from just 34 cents a barrel last week.

The dramatic strengthening at the front end of the U.S. crude oil curve has been tied to the restart last month of BP's revamped 413,000 barrel-per-day Whiting refinery, which is expected to help absorb more Canadian crude oil supplies that might otherwise fill up tanks at Cushing, Oklahoma, the delivery point for the U.S. oil futures contract.   Continued...