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 The U.S. oil futures contract traded above $100 per barrel for the
entire session for the first time since Oct. 18, and settled at its
highest point since then, after data showed TransCanada Corp's Gulf
Coast pipeline began in earnest to drain oil from benchmark delivery
point Cushing, Oklahoma.
U.S. oil stranded at Cushing has depressed prices for the last three
years.
Doubts over whether that oil would be consumed by refiners or
whether the pipeline would simply displace the glut capped a gain in
prices after the same data showed a larger than expected build in
overall crude inventories. Expectations for dwindling seasonal
demand for heating fuels also helped curb gains.
Demand for crude was also expected to decrease as refiners head into
maintenance season.
Brent ended moderately higher, pressured as traders sold the
European benchmark and bought WTI after the data were released.
Brent drew support from a stronger 2014 oil-demand forecast from
OPEC and Chinese data released late Tuesday that showed oil imports
hit record highs.
The closely traded Brent/WTI spread dipped below $8 at one point and
narrowed to settle at a four-month low at $8.42.
Market watchers broadly expected the spread to tighten as supplies
drain from Cushing, even as the approach of refinery maintenance
season will weigh on U.S. oil futures and slightly widen the gap
between the two oil benchmarks longer term.
"As we ramp up production and any pipeline to the Gulf, that's going
to contract the spread even more," said Richard Ilczyszyn, chief
market strategist and founder of iitrader.com in Chicago, Illinois.
"Ultimately, whatever short-term widening we have because of
refinery maintenance, it's going to narrow back in."
Brent crude for March delivery ended 11 cents higher at $108.79.
U.S. crude settled 43 cents higher at $100.37, after trading as high
as $101.38.
Traders who bought contracts to cover short positions contributed to
Brent's small gains, analysts said, as the front-month March
contract expires on Thursday. Brent oil for April delivery settled
17 cents higher at $108.35.
Investors have been tracking declines in distillates, which include
heating oil and diesel, of more than 1 million barrels for each of
the last four weeks of January as refiners have been pumping out
heating fuel to warm homes and businesses amid record cold weather.
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This week's report showed somewhat of a slowdown. Distillates fell
by a less than expected 731,000 barrels in the week to Feb. 7, data
from the U.S. Energy Information Administration showed on Wednesday.
U.S. ultra-low sulfur diesel (ULSD), commonly known as heating oil,
ended 1.56 cents lower at $3.0125 per gallon.
U.S. crude oil inventories rose by 3.3 million barrels, more than
expected in a Reuters poll, the EIA data showed. The build came in
spite of a 2.6 million barrel draw in Cushing stocks.
Gasoline fell by 1.9 million barrels compared to estimates for a
100,000 barrel draw. U.S. RBOB gasoline futures settled 1.05 cents
higher at $2.7631 per gallon.
Brent trading was focused in part on crude oil imports in China, the
world's second largest oil consumer, which rose 11.9 percent in
January from a year earlier.
The potential for further supply interruptions from Libya set a
floor under Brent prices. Libyan protests once again shut pipelines
from the Wafa oilfield in the west of the country and are
threatening to block another line from the El Sharara field.
OPEC raised its 2014 outlook for world oil demand by 40,000 bpd,
becoming the second major forecaster this week to predict higher
fuel use.
(Additional reporting by Lin Noueihed
in London and Jacob Gronholt-Pedersen in Singapore; editing by Alden
Bentley and Chris Reese)
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