Trade ended Friday with the premium of Brent to US oil futures at the $5.57 a barrel, the narrowest level since January 2011, marking a near $15 drop in the spread since the start of the year, Reuters reported.
Growing capacity to ship crude from the Cushing, Oklahoma delivery point for the US oil futures contract has alleviated some of the pressure on West Texas Intermediate crude, allowing it to rebound relative to Brent.
Trade of the spread was heavy over the first half of the year when the new pipeline capacity came online as part of industry efforts to realign the market to get booming production from US shale and Canadian oil sands plays to the Gulf Coast refining hub.
The US infrastructure changes came against a backdrop where traders were weighing demand concerns and changes to monetary policy in top consumer nations such as the United States and China.
“We’re definitely going through an adjustment period in this market. We’re not only going through changing of the guard of the benchmarks but we are looking towards the world beyond stimulus,” Phil Flynn, analyst at Price Futures Group in Chicago, told the news wire.
“There’s absolutely no doubt that this taper up/taper down was affecting the price of oil. Does anyone believe oil would be at $90 a barrel if the Fed wasn’t buying this $80b a month?”
Brent crude oil futures shed 66 cents a barrel to settle at $102.16 by 12:45 pm EDT (1645 GMT), closing the quarter down $7.86 a barrel and down $8.95 a barrel for the first half.
US crude oil gained 8 cents on the day to $97.13 a barrel, ending the quarter down 10 cents but up $5.31 from the close of 2012.
On Friday, oil came under pressure from the stronger dollar as investors resumed pricing in the possibility that the Federal Reserve will begin to pare back its bond-buying program as soon as its September policy meeting.
Fed Governor Jeremy Stein on Friday highlighted September as a possible time when the US central bank will need to consider reducing its ‘quantitative easing’ economic stimulus program.
A strong US currency makes dollar-denominated commodities such as Brent crude oil more expensive for holders of other currencies, and weighs on commodity prices.
Traders were also watching ongoing turmoil in Libya and other oil-producing regions, as well as a North Sea outage.
Britain’s Buzzard oilfield output is expected to stay at a reduced rate of around 170,000 barrels per day for around five days, an industry source said on Thursday.
Russian Urals crude values spiked to near a record high on Friday as oil producer Surgut sold barrels at a healthy premium due to a shortage of supplies from the world’s largest oil producer from Baltic ports.
Hedge funds and other large speculators slashed their bets on rising US crude oil prices in the seven days to 25 June, cutting their net long futures and option positions by more than 40,000 US crude oil contracts, the equivalent of over 40 million barrels of oil, from a two year high hit the previous week, data from the US Commodity Futures Trading Commission showed on Friday.