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 The price difference between the European benchmark Brent and U.S.
crude oil settled at its narrowest point in more than 2-1/2 months,
after news that U.S. gross domestic product grew by a 3.2 percent
annual rate, according to the U.S. Commerce Department.
Also supporting U.S. crude oil were expectations that the southern
leg of TransCanada Corp's Keystone pipeline has begun to drain major
amounts of oil from the hub at Cushing, Oklahoma, where the contract
is priced.
Brent crude rose on concerns over supply interruptions from Libya.
However, growing evidence of a fuel demand slowdown in the
second-biggest oil consumer, China, capped gains.
BP announced Thursday it dropped plans to invest in a refinery in
China, as Royal Dutch Shell did late last year. And violence in
Libya threatened to destabilize the oil exporter again after an
attempted assassination nearly took the life of the deputy prime
minister.
"A lot of the strength is coming from the spread markets, and that
leads us to believe there's a strong demand for March U.S. crude,"
said Joseph Posillico, senior vice president of energy derivatives
at Jefferies Bache in New York. As well "there are expectations that
Cushing could show some significant draws."
U.S. crude oil futures settled 87 cents higher at $98.23, after
reaching a session high of $98.59, its highest since Jan. 2.
Brent crude rose 10 cents higher to settle at $107.95 a barrel.
Brent's premium to U.S. crude narrowed 77 cents to $9.72, the lowest
settlement price since Nov. 7.
U.S. ultra-low sulfur diesel (ULSD), commonly known as heating oil,
was up nearly four cents to $3.2206 per gallon. U.S. government data
released Wednesday showed a steep decline, the third in as many
weeks, in distillate inventories, which include heating oil.
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U.S. DATA RESONATES
Consumer spending was the main driver of U.S. fourth-quarter GDP
growth, but there was also a strong boost from trade. Business
investment also lent support as did the restocking of warehouses but
not at the same scale as in the third quarter.
The advance fourth-quarter GDP was released a day after the Federal
Reserve announced it would further taper the size of its stimulus
program because "growth in economic activity picked up in recent
quarters."
A pullback in stimulus is expected to strengthen the dollar, which
typically weighs on dollar-priced commodities such as oil.
"The Fed is talking about strong economic fundamentals," said
Richard Hastings, a strategist at Global Hunter Securities. "For
commodities, trade is stable and as long as exports continue to hang
out and drift higher, the underlying commodities price remains
bullish."
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