Brent edges higher, supported by spread trade

Tue Jul 23, 2013 1:23pm EDT
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By Matthew Robinson

NEW YORK, July 23 (Reuters) - Brent crude rose on Tuesday, lifted by profit-taking on the trans-Atlantic spread, China's efforts to support its economy, and supply concerns.

Brent's premium to U.S. oil futures , which had narrowed sharply last week and briefly inverted on Friday, weakened for a second straight day. The spread touched the 14-day moving average of $2.68 a barrel on Tuesday, before narrowing to $1.25 a barrel just after 1 p.m. EDT (1700 GMT).

The spread has narrowed from near $6 at the start of the month and over $23 a barrel in February on expectations new pipeline capacity will alleviate a glut of oil at the Cushing, Oklahoma delivery point for the U.S. crude contract by shipping it to the Gulf Coast.

"You are seeing a little bit of profit taking on the spread," said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.

Front-month September Brent crude oil traded up 33 cents to $108.48 a barrel at 1:15 p.m. EDT (1715 GMT).

Further support for Brent came from news that China remains committed to steering its economy towards consumption as the main growth driver and will fine-tune policies to deal with any prolonged slowdown.

September U.S. crude futures, which became the front-month contract on Tuesday, rose 29 cents to trade at $107.23 a barrel. After trading over 70 on the relative strength index, a technical sign a commodity has been overbought, for most of July, the front-month contract has dipped below that level over the past two sessions.

RBOB gasoline futures traded up 2 cents to more than $3.07 a gallon, helping to counter a near 2.2 percent slide on Monday. U.S. gasoline is up more than 11 percent this month, after a series of refinery disruptions have stirred supply concerns in the midst of the summer driving season.   Continued...