Crude heads for $110

28 March 2013, London – Crude oil headed towards $110 a barrel on Wednesday, extending gains after robust US data brightened the demand prospects even with eurozone worries still hanging in the air.

Brent crude rose $0.16 to $109.52 a barrel by 1030 GMT, after rising for a third straight day in the previous session. US oil fell 54 cents to $95.80 after ending $1.53 higher.

“We look for strong US economic numbers to continue through the rest of this week, with the associated equity gains keeping WTI supported at around the $95 to $96 region,” Jefferies Bache analysts said.

“However, we do feel that crude and product stock categories could offer some bearish surprises, especially within crude.”

Reflecting investor sentiment on the economies of the two regions, Brent’s premium to US crude remained near the $12.52 a barrel hit in the previous session, the smallest in eight months.

The spread has narrowed sharply from $23.45 in February. The improving US economy and increased pipeline flows from the Midwest have supported the US benchmark oil contract.

Meanwhile, Brent has been pressured by increased supplies from the North Sea, while the strict conditions on a rescue plan for Cyprus underlined concerns about Europe’s financial stability.

The upbeat outlook for the United States was tarnished somewhat by other data on Tuesday showing a sharp drop in consumer confidence as Americans worried about the impact of tighter fiscal policy, particularly $85 billion in government budget cuts known as the “sequester”.

Elsewhere, data from the American Petroleum Institute late on Tuesday showed US crude oil stocks rose 3.7 million barrels last week, much higher than forecast in a Reuters survey of analysts. Inventories of gasoline and diesel both fell more than expected.

The more closely-watched government data from the US Energy Information Administration is set for release at 1430 GMT on Wednesday.

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