April 24, 2012 / 2:39 AM / in 5 years

Brent slips, narrows spread vs stronger U.S. oil

A motorist prepares to put fuel into her car at a petrol station in Melbourne July 3, 2008. REUTERS/Mick Tsikas

NEW YORK (Reuters) - Brent crude prices fell and U.S. crude edged up on Tuesday, narrowing the spread between the two benchmarks, while weak gasoline futures weighed on the complex as market participants rotated positions ahead of weekly inventory reports.

U.S. gasoline fell nearly 1 percent, the biggest percentage move in the energy futures complex. Analysts cited pressure from anticipated imports, lackluster demand and weak cash price differentials.

“(A)n expected upswing in imports during the coming weeks, soft Gulf coast and Midwest cash markets and possible sale of Sunoco’s Philadelphia refinery all tilt in favor of renewed gasoline futures weakness,” Jim Ritterbusch, president at Ritterbusch & Associates, said in a report.

Brent’s premium to the West Texas Intermediate (WTI) benchmark U.S. crude narrowed to $14.61 a barrel based on settlements, after reaching $15.80 intraday. It marked the third straight session that the spread has failed to push above last Thursday’s $16.03 intraday peak.

Brent June crude fell 55 cents to settle at $118.16 a barrel, having swung from $117.85 to $118.94.

Brent briefly turned positive and U.S. crude extended gains as North Sea Forties crude, one of the four streams making up the physical portion of the Brent benchmark, has hit further delays following the weekend shutdown at the Buzzard field.

U.S. June crude rose 44 cents to settle at $103.55 a barrel, having reached $104.10. Falling to $102.79 intraday, it recovered without testing support near the 100-day moving average (MA) of $102.07.

U.S. crude tested below the 100-day MA the previous session and several times this month, after staying above level since November 1, 2011.

Total crude trading volumes for Brent and U.S. crude remained below their 30-day averages, with Brent turnover higher than for its U.S. counterpart.

U.S. crude oil implied volatility fell hard early as crude oil futures traded within a narrowly-defined range.

The Chicago Board Options Exchange’s Oil Volatility Index .OVX, dropped to 25.72 percent intraday, its lowest since December 27, 2010, before recovering to close at 26.16, down 2.79 percent.

A weak dollar was cited as bolstering dollar-denominated crude, but mixed U.S. economic data offered little support.

Oil prices continue to be buffeted as Europe’s debt problems and worries about slower global economic growth cast a bearish picture, while sanctions on Iran because of its nuclear dispute with the West and the potential for other supply disruptions remain supportive.

U.S. GASOLINE WEAKENS

U.S. RBOB gasoline fell nearly 3 cents, but maintained its premium to U.S. heating oil despite the distillate benchmark falling a penny.

Gasoline cargoes on offer to the New York Harbor products market, delivery point for the U.S. futures contract, have helped pressure cash differentials and futures. <PRO/U>

Sunoco Inc’s (SUN.N) talks to keep the biggest U.S. East Coast refinery running will keep the facility open at least through August and the summer driving season, regardless of the outcome of negotiations with the Carlyle Group LP, adding pressure to gasoline prices.

U.S. gasoline demand fell last week as pump prices remained above year-ago levels, MasterCard said in a weekly report. Demand fell 6.1 percent from a year earlier and 0.3 percent from the previous week, the report said.

U.S. OIL INVENTORIES

U.S. crude stocks fell 985,000 barrels last week, industry group American Petroleum Institute said in a report, against a forecast for a build. <API/S>

Gasoline stocks fell 3.6 million barrels and distillate inventories fell 3.6 million barrels, the API said.

U.S. crude stocks were expected to have risen 2.7 million barrels last week, with distillates near flat, up 100,000 barrels and gasoline stocks down 900,000 barrels, a Reuters survey of analysts ahead of the API report showed. (EIA)

The U.S. Energy Information Administration (EIA) will report will follow on Wednesday at 10:30 a.m. EDT (1430 GMT).

Markets on Wednesday will monitor the result of the U.S. Federal Reserve’s two-day policy meeting, with the central bank likely to stick to its previous message that official borrowing costs should stay near zero.

Additional reporting by Gene Ramos and Jeffrey Kerr in New York, Ikuko Kurahone in London and Luke Pachymuthu in Singapore; Editing by David Gregorio, Dale Hudson and Sofina Mirza-Reid

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