09 February 2013, News wire – U.S. crude-oil futures settled slightly lower Friday on renewed concerns about a glut of crude oil in the Midwest. However, the European crude benchmark, Brent futures, rose 1.4% to their highest level in eight months.
U.S. crude prices turned negative on the day after a report from energy-market information group IIR Energy said Phillips 66’s 306,000-barrels-a-day refinery in Wood River, Ill., will shut down in late February for maintenance.
The report exacerbated worries that more crude would be added to an abundance of oil trapped in the Midwest. Large amounts of oil pooling in Cushing, Okla.–where the benchmark Nymex is settled–already weigh on domestic prices.
“With the refinery shutting down in Wood River, people are now realizing there’s going to be a lot of crude-oil supply backed up at Cushing,” said Carl Larry, analyst at Oil Outlooks & Opinions.
West Texas Intermediate light, sweet crude oil for March delivery settled lower by 11 cents, or 0.1%, at $95.72 a barrel on the New York Mercantile Exchange.
Mr. Larry added that the Wood River shutdown will be “the first of many” throughout the refinery maintenance season, which he expects will widen the gap between WTI and Brent futures.
The price gap, or spread, between the two benchmarks widened to $23.18 Friday, the most since Nov. 26.
The two crudes have traditionally traded within a few dollars of each other, but over the last two years Brent has risen sharply against WTI because of insufficient means to transport the crude from Cushing to refiners outside the Midwest.
The gap had shrunk as low as $16 in mid-January after the Dec. 5 expansion of the Seaway pipeline. The pipeline carries crude from Cushing to the massive refining complex along the coast of the Gulf of Mexico. Traders anticipated the increase in Seaway’s capacity from 150,000 barrels a day to 400,000 would narrow the price gap between the Brent and WTI. Nymex futures have fallen since the Jan. 23 announcement that Seaway flows have been cut to 175,000 barrels a day due to a lack of storage space where the pipeline ends in Texas.
Brent prices, meanwhile, settled $1.66 higher at $118.90 a barrel on the IntercontinentalExchange on news that Exxon Mobil (XOM) declared force majeure on Thursday on some of Nigeria’s benchmark Qua Iboe crude oil exports due to repair work on a section of the pipeline. The curtailing of supply on the global market bolstered Brent futures.
“It’s become a tale of two markets where Brent is supported by tight supply while WTI is a disaster” due to the Midwestern glut of oil, said John Kilduff, founding partner at Again Capital.
Positive trade data from China helped cap declines in U.S. oil prices. China said exports in January rose 25% from a year earlier while imports were up 28.8% on the year. Most notably, China’s crude imports climbed 7.4% from a year earlier, indicating increased oil demand from the world’s No. 2 consumer of crude oil.
In product markets, heating oil prices are up sharply on anticipated demand ahead of a winter storm bearing down on the Northeast, which is expected to bring heavy snowfall and strong winds.
Front-month March reformulated gasoline blendstock, or RBOB, settled up 5.89 cents, or 2%, to $3.0588 a gallon. March heating oil settled up 3.89 cents, or 1.2%, to $3.2384 a gallon.