July 23, 2013 / 5:24 PM / 4 years ago

Brent edges higher, supported by spread trade

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.

Weekly U.S. inventory data from the American Petroleum Institute and the U.S. Energy Information Administration, is expected to show the fourth-straight week of declines in commercial crude inventories, according to a Reuters poll of seven analysts showed on Monday.

Refiners on the Gulf Coast have been cranking up crude throughput this month as exports support margins. The API and EIA data will be released late Tuesday and early Wednesday, respectively.


Traders were also closely watching supply disruptions in the United States. Enbridge Inc shut its 210,000 barrel per day Line 81 pipeline, which carries Bakken crude from North Dakota to Minnesota following the discovery of a small leak.

The shutdown comes as traders say ongoing maintenance at Syncrude Canada Ltd’s northern Alberta oil sands projects tightens supplies of light sweet crude and bolsters prices for U.S. crudes such as Light Louisiana Sweet.

In addition, traders said BP had been forced to shut in its 250,000 bpd Thunder Horse oil platform in the Gulf of Mexico as work was performed on the Destin natural gas pipeline system which into which Thunder Horse connects.

BP said the North Sea Forties Pipeline System was operating under a “minor” restriction on flows that was likely to last another week or so.


Traders have also been focusing on violence in the Middle East and threats to supplies from the region, which have lent some support to Brent prices over recent weeks.

Protesters demanding jobs closed off the eastern Libyan port of Zueitina for a sixth day on Monday, extending a halt in oil exports, according to a senior oil industry source and one of the demonstrators.

Six people were killed in Cairo on Tuesday in violence between supporters and opponents of deposed President Mohamed Mursi, state-run media reported.

Any Middle East conflict raises worries of disruption to oil-producing areas or shipments, although none has taken place due to the Egyptian crisis so far.

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