07 December 2013, News Wires – Brent crude oil futures fell and US crude futures gained for a fifth straight session on Thursday, narrowing the gap between the two benchmarks to a two-week low as positive US economic data hinted at a resurgence of demand for oil in the world’s largest consumer.
Traders said gains in the US benchmark were limited by concern over whether the positive US data would prompt the Federal Reserve to start curbing its monthly bond-buying programme, which could reduce support for riskier assets such as commodities.
Brent crude fell by more than $1 at one point during the session, following a month of consistent gains that saw prices rise from $103 in early November to above $113 on Wednesday, Reuters reported.
“The market’s run basically straight up from the 7th of November and now it’s taking a pause,” Rich Ilczyszyn, chief market strategist and founder of iitrader.com in Chicago, told the news wire.
During that month, Brent’s premium over US crude widened from below $9 to over $19.
That spread has unwound over the past week, as West Texas Intermediate (WTI) has consistently outperformed Brent, knocking more than $5 off the spread and bringing it to a session low of $12.97 per barrel on Thursday.
Brent crude for January delivery fell 90 cents to settle at $110.98 a barrel.
US crude rose 18 cents to settle at $97.38 a barrel, after rising more than 5% over the past four sessions, putting the US benchmark on course for its largest weekly gain since July.
Brent’s premium over US crude stood at $13.60, down nearly $6 from $19.41 reached as recently as 27 November.
“Brent is down because we’re unwinding that spread, long Brent, short WTI,” said Phil Flynn, an energy analyst with the Price Futures Group in Chicago.
US gross domestic product grew at a revised 3.6% annual rate, up from a 2.8% pace reported earlier and above the 3.0% expected by economists polled by Reuters.
Initial claims for state unemployment benefits fell by 23,000 to a seasonally adjusted 298,000, declining for a third straight week.
“We seem not to be able to build any upside momentum in US crude despite some pretty impressive economic releases today, but that’s probably down to the fact that good news on the economy equates to bad news on the quantitative easing front,” said Addison Armstrong, senior director of market research at Tradition Energy in Stamford, Connecticut.
Figures from the US Energy Information Administration released Wednesday showed crude inventories fell by 5.6 million barrels in the week to 29 November, cutting around one-sixth of the 36 million barrels that had built up over the previous 10 weeks.
Crude oil production in the US dipped slightly last week but held above 8 million barrels per day, the EIA data showed.
Flynn noted that an improving economy and high oil production in the US could make the oil market less dependent on the Fed’s monetary policy and more responsive to the needs of the real economy.
“Now the fundamentals are at least making the oil move a little more independently,” he said.
Traders were also eyeing hurricane-force winds in the North Sea that threatened to disrupt oil supplies from the region. So far two oil platforms have been shut.
Opec agreed on Wednesday to keep its production target unchanged at 30 million bpd for the first half of 2014.
Expectations of higher output from some Opec members in coming months and a continued increase from supplies in North America have left some traders questioning whether the producer group will need to curb output in the second half of 2014.