Brent Back above $100/Barrel, Rebounding from Selloff

Oil futures settled higher Monday, with Brent crude above $100 a barrel for the first time in a week, as buyers swooped in following last week's deep selloff.

Light, sweet crude for May delivery, which expired at the close of trading, settled 75 cents, or 0.9%, higher at $88.76 a barrel on the New York Mercantile Exchange. The more active June contract settled 92 cents, or 1%, higher at $89.19 a barrel.

Brent crude on the ICE futures exchange settled 74 cents, or 0.7%, higher at $100.39 a barrel. It was the first time the contract settled above the $100 mark since April 15.

Futures advanced as traders sought to cover short positions or pick up contracts at a discount following last week's selloff that was driven largely by concerns about weakening global oil demand.

"We saw crude oil come under a lot of pressure over the last couple of weeks and I think you saw some bargain hunters come in," said Andy Lipow, president of Lipow Oil Associates, a consultancy.

Signs of weak global oil demand have been a drag on oil prices, following demand-growth downgrades from Organization of the Petroleum Exporting Countries, the International Energy Agency and the Energy Information Administration. A number of Wall Street analysts have also cut their outlook on oil prices, citing demand weakness.

Nymex crude futures have sunk 9.4% from a recent peak reached in late January.

Despite ending the day higher, crude futures shed some of their steepest gains of the day. But oil prices will likely need additional cues before falling much further, some analysts said. Mr. Lipow pointed out overall oil demand continues to increase and stimulus measures around the world will place a floor under prices.

"Energy has a bit more of a positive tilt to it" compared with other assets Monday, said Bob Yawger, analyst at Mizuho in New York, pointing to the tepid day in equities. A drop in the U.S. stock market at one point sent oil futures into negative territory on the day, though prices recovered later.

The Dow Jones Industrial Average was recently up 0.2% at 14575.

Analysts have said any output reduction by OPEC could send prices rallying again. Monday, however, the oil minister of the United Arab Emirates suggested the oil market is balanced at current levels, and analysts say the UAE's view is normally aligned with that of Saudi Arabia, the cartel's biggest producer.

Front-month May reformulated gasoline blendstock, or RBOB, settled 0.3 cent, or 0.1%, lower at $2.7694 a gallon. May heating oil settled 2.18 cents, or 0.8%, higher at $2.8094 a gallon.

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Crude Oil Settles Lower on Weak Demand; Brent falls to 9-Month Low

Crude-oil futures prices fell sharply Friday, hit by growing worries over rising U.S. oil supplies and slowing growth in global oil demand.

ICE North Sea Brent crude-oil futures, a key global benchmark, dropped for a third straight day, settling at a nine-month low.

Traders said Brent is under pressure from continued worries about weakness in European economies and reduced demand caused by refinery maintenance in Europe and Asia, along with growing competition from rising U.S. oil output.

U.S. benchmark oil futures settled at five-week lows as crude oil inventories have risen to their highest level since July 1990, even as domestic refiners have lifted crude oil processing rates to the highest early April level in eight years. Those busy processers are increasing supplies of gasoline, erasing concerns about tight supplies ahead of the peak spring-summer driving season, which looks to be stuck in reverse this year due to weak demand.

Government forecasters, while warning of a slowdown in the growth of global oil consumption, expect demand for gasoline --the most widely used petroleum product in the world's biggest oil consumer--to slip to a 12-year low in the peak season. The EIA said U.S. vehicles' increased miles per gallon more than offsets the expected rise in miles traveled, the EIA said.

Spurred by the weak outlook and news that inventories in the key East Coast region now top five-year averages, traders slashed gasoline futures by 14 cents as gallon over the past three sessions, leaving prices at a three-month low on Friday.

"It's simply a supply-demand situation," said Dan Flynn, an analyst at Price Futures. "We've basically got more supply here than we know what to do with."

Light, sweet crude oil for May delivery on the New York Mercantile Exchange settled 2.4%, or $2.22 lower, at $91.29 a barrel, the lowest price since March 6.

ICE North Sea Brent for May delivery settled 1.1%, or $1.16 a barrel lower, at $103.11 a barrel, after an intraday low of $101.09 a barrel.

Forecasts this week from the U.S. Energy Information Administration, the Organization of the Petroleum Exporting Countries, and the International Energy Agency call for demand in the current quarter to drop by 180,000 to 400,000 barrels a day from the first-quarter level. That compares with a quarter-to-quarter rise at this time last year of 300,000 barrels a day, according the IEA, the energy watchdog of the major industrialized nations.

Tim Evans, analyst at Citi Futures, said prices have been hit hard by a "relatively consistent gloomy picture that is weighing on market sentiment."

Weak seasonal demand in the current quarter means, "there's simply no reason to anticipate a quick recovery," Mr. Evans said. "Demand and prices may rebound in the third quarter, but it will likely begin from a lower price level."

Analysts at Barclays said current oil-price weakness is "transient" and demand will pick up in coming months, as European refiners return from maintenance by late May and boost crude oil demand. Asian refiners are expected to wrap up seasonal work in June, providing a further lift for crude prices.

Lower global refiner demand for Brent comes as imported crudes are losing market share in the U.S. due to rising domestic output. PBF Energy Inc. said this week it plans to process up to 70,000 barrels a day of crude oil from North Dakota's Bakken shale oil region at its 190,000 barrels-a-day refnery in Delaware, a move which analyst said will lower crude imports, adding to pressure on Brent crude prices.

Gene McGillian, broker and analyst at Tradition Energy noted that U.S. crude prices have fallen by more than more than $7.50 a barrel since the April 1 high of $97.80, and said good part of the worries about the global economy may be factored into current prices.

"We may see a test of $90 a barrel, but I don't think the bears will get much more ferocious unless we get signs a further downturn," he said.

May reformulated gasoline blendstock futures settled 1%, or 2.92 cents, lower at $2.8018 a gallon, the lowest price since Jan. 18.

May heating oil futures fell 2.73 cents, to settle at $2.8719 a gallon, the lowest price since March 19.

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Weak Jobs Data Batters Crude; Brent Sinks To Lowest in 8 Months

A disappointing reading on March U.S. payrolls sent crude oil futures tumbling, with Brent crude sinking to an eight-month low, on fresh concerns about weak oil demand in the world's biggest crude consumer.

Brent crude for May delivery fell $2.09, or 2%, to $104.25 a barrel, poised to settle at its lowest level since July 24.

Light, sweet crude for May delivery settled 56 cents, or 0.6%, lower at $92.70 a barrel on the New York Mercantile Exchange, its lowest level in two weeks.

The U.S. added just 88,000 jobs in March, according to the Labor Department Economists surveyed by Dow Jones Newswires had expected nonfarm payrolls to rise 200,000.

The unemployment rate, obtained from a separate survey, ticked 0.1 point lower to 7.6%.

The report was a particularly heavy blow for oil markets, analysts said, because the U.S. economy had been adding jobs at a quickening clip in recent months. Job growth is closely correlated with oil demand because fewer jobs means fewer motorists driving to work, buying goods or taking vacations.

"The employment rate is very critical to having a constructive outlook on energy demand," said John Kilduff, founding partner at Again Capital in New York. "It's been a bright spot, and now it's obviously diminishing."

Friday marked the third straight day of lower crude prices, with Nymex crude shedding 4.7% this week and the Brent contract posting a 5.2% loss. Analysts attribute the declines to a drumbeat of disappointing economic news this week, including a weak jobs report Wednesday from Automatic Data Processing Inc. and a disappointing read on weekly jobless claims Thursday.

Brent's heavier losses have raised expectations among investors that the two crude-oil benchmarks, which have traded far apart for more than two years, may be closing in on each other again. Brent's premium to WTI shrank on Friday to under $12 to its narrowest since late June.

"This week is really not about oil fundamentals; it's about global macro [news] and appetite for risk in commodities as a whole," said Brison Bickerton, managing director at Freepoint Commodities, a trading firm.

Brent's losses have been exacerbated by several independent factors, say analysts, including improving output in the North Sea--where the crude is produced--and cooling global tensions. Dow Jones Newswires data indicate that loadings of crude oil in the North Sea in May are set to rise 8.5% from April levels.

Meanwhile, Iran sat down Friday with global powers to discuss plans to end an international stand-off over its nuclear program, signaling that a violent confrontation remains unlikely even if diplomatic progress remained elusive.

A series of high-profile oil analysts have taken an increasingly bearish stance on oil prices in recent weeks. Last week, analysts at Citigroup said rising efficiency and increasing natural-gas demand could cause oil demand to peak by the end of this decade, leading oil prices to trade between $80 and $90 a barrel in the long term.

On Wednesday, oil analysts at Barclays cut their forecast for 2013 Brent crude to $112 a barrel from $125 a barrel, and their view for Nymex crude to $95 a barrel from $108 a barrel. The analysts cited a "a more placid geopolitical environment than previously expected."

Refined fuels also plumbed new lows Friday. Front-month May reformulated gasoline blendstock, or RBOB, settled lower by 3.51 cents, or 1.2%, at $2.8636 a gallon, its lowest finish since Feb. 27.

May heating oil finished lower by 5.36 cents, or 1.8%, at $2.9098 a gallon, a one-week low.

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Crude 16 Cents Lower; Brent Climbs 1%

Global benchmark oil prices diverged sharply Monday, with North Sea Brent crude gaining on concerns over the shutdown of a U.S. pipeline in the key Gulf Coast refining region.

U.S. crude oil futures on the New York Mercantile Exchange settled 16 cents lower, at $97.07 a barrel, on profit taking after a 5.2% gain over the previous five sessions.

Traders, meantime, bid up the price of North Sea Brent crude oil futures on the belief that oil imports that compete with Brent will be strongly sought after by U.S. Gulf Coast refiners after the closure of Exxon Mobil's Pegasus Pipeline.

The 95,000 barrels a day pipeline that brings Canadian crude oil from Patoka, Ill. to Nederland, Texas was closed Friday after a leak on a section in Arkansas. The company hasn't given a likely date for restarting the line yet.

Analysts said the closure of the pipeline means that crude oil inventories will continue to build up at bottlenecks in the middle of the country, such as the Cushing, Okla. terminal that is the delivery point for the Nymex crude oil futures contract. Refiners have in recent week increased the volumes of oil that they move from Cushing, using shipments by rail and truck to augment stunted pipeline flows.

Expectations of a strong and steady draining of inventories at Cushing have brought strong pressure to bear on Brent prices in recent week and lifted the value of the Nymex benchmark contract. Greater moves of oil out of Cushing would make Gulf refiners less dependent on crude oil imports, which are priced against Brent, a global benchmark and would bolster U.S. crude oil prices. "Brent has dropped so much recently that we are seeing a turnaround in that now," said Gene McGillian, analyst and broker at Tradition Energy.

ICE North Sea Brent for May delivery was up $1.07, or 1%, at $111.09 a barrel late Monday. Brent posted a premium of $14.02 a barrel to the Nymex contract, the most since March 21. Brent ended March at $12.79 a barrel above the Nymex contract, down from a premium at the end of February of $19.33 a barrel.

Mr. McGillian said prices of U.S. oils were also undermined by indications of slower than expected growth in the manufacturing sectors in both the U.S. and China, the world's top two oil consumers.

Meantime, traders also are concerned about rising oil inventories in the U.S.

U.S. crude oil inventories rose 1.9 million barrels in the week ended March 29, according to early estimates from five analysts surveyed by Dow Jones Newswires. A rise of that size would put crude stocks at their highest level since July 1990 and at their highest end March level since 1931.

The closely watched government inventory data from the Energy Information Administration is due to be released at 10:30 a.m. EDT Wednesday. The American Petroleum Institute, a trade group, releases its data at 4:30 p.m. EDT on Tuesday.

Gasoline stocks are expected to drop by 300,000 barrels, while distillate stocks, comprising heating oil and diesel fuel, were expected to fall 400,000 barrels. Refiners, returning from maintenance work, are expected to boost capacity utilization by 0.4 percentage point to 86.1%.

Elsewhere, May heating oil settled up 2.17 cents, at $3.0687 a gallon, while May reformulated gasoline blendstock futures were 0.91 cent lower, at $3.1015 a gallon.

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Crude 16 Cents Lower; Brent Climbs 1%

Global benchmark oil prices diverged sharply Monday, with North Sea Brent crude gaining on concerns over the shutdown of a U.S. pipeline in the key Gulf Coast refining region.

U.S. crude oil futures on the New York Mercantile Exchange settled 16 cents lower, at $97.07 a barrel, on profit taking after a 5.2% gain over the previous five sessions.

Traders, meantime, bid up the price of North Sea Brent crude oil futures on the belief that oil imports that compete with Brent will be strongly sought after by U.S. Gulf Coast refiners after the closure of Exxon Mobil's Pegasus Pipeline.

The 95,000 barrels a day pipeline that brings Canadian crude oil from Patoka, Ill. to Nederland, Texas was closed Friday after a leak on a section in Arkansas. The company hasn't given a likely date for restarting the line yet.

Analysts said the closure of the pipeline means that crude oil inventories will continue to build up at bottlenecks in the middle of the country, such as the Cushing, Okla. terminal that is the delivery point for the Nymex crude oil futures contract. Refiners have in recent week increased the volumes of oil that they move from Cushing, using shipments by rail and truck to augment stunted pipeline flows.

Expectations of a strong and steady draining of inventories at Cushing have brought strong pressure to bear on Brent prices in recent week and lifted the value of the Nymex benchmark contract. Greater moves of oil out of Cushing would make Gulf refiners less dependent on crude oil imports, which are priced against Brent, a global benchmark and would bolster U.S. crude oil prices. "Brent has dropped so much recently that we are seeing a turnaround in that now," said Gene McGillian, analyst and broker at Tradition Energy.

ICE North Sea Brent for May delivery was up $1.07, or 1%, at $111.09 a barrel late Monday. Brent posted a premium of $14.02 a barrel to the Nymex contract, the most since March 21. Brent ended March at $12.79 a barrel above the Nymex contract, down from a premium at the end of February of $19.33 a barrel.

Mr. McGillian said prices of U.S. oils were also undermined by indications of slower than expected growth in the manufacturing sectors in both the U.S. and China, the world's top two oil consumers.

Meantime, traders also are concerned about rising oil inventories in the U.S.

U.S. crude oil inventories rose 1.9 million barrels in the week ended March 29, according to early estimates from five analysts surveyed by Dow Jones Newswires. A rise of that size would put crude stocks at their highest level since July 1990 and at their highest end March level since 1931.

The closely watched government inventory data from the Energy Information Administration is due to be released at 10:30 a.m. EDT Wednesday. The American Petroleum Institute, a trade group, releases its data at 4:30 p.m. EDT on Tuesday.

Gasoline stocks are expected to drop by 300,000 barrels, while distillate stocks, comprising heating oil and diesel fuel, were expected to fall 400,000 barrels. Refiners, returning from maintenance work, are expected to boost capacity utilization by 0.4 percentage point to 86.1%.

Elsewhere, May heating oil settled up 2.17 cents, at $3.0687 a gallon, while May reformulated gasoline blendstock futures were 0.91 cent lower, at $3.1015 a gallon.

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EnQuest Cuts 2013 Production Forecast due to Brent Shutdown

North Sea-focused independent EnQuest reported Wednesday that it has reduced its guidance for production during the whole of 2013 by approximately 1,000 barrels of oil equivalent per day (boepd), mainly as a result of shutdowns involving the Brent pipeline during the first quarter.

Reporting its results for 2012, EnQuest said that it now expects average production for 2013 to come in at between 22,000 boepd and 27,000 boepd. For 2012, EnQuest reported average production of 22,802 boepd – down 3.8 percent on 2011.

Meanwhile, the firm added that it expects to drill 12 wells during 2013. These will include six production wells, three injection wells and three exploration/appraisal wells.

Capital expenditure for 2013 is expected to be approximately $750 million, with around $350 million invested in EnQuest's Alma/Galia development located on the P1825 license, Block 30/24b, in the UK North Sea. The development is scheduled to begin in 4Q 2013.

$75 million has been earmarked as pre-development expenditure for the North Sea's Kraken development prior to the submission of the project's field development plan. First oil from Kraken is targeted for 2016.

Appraisal wells will be drilled at Cairngorm and Kraken during 2013, while the firm also expects to drill an exploration/appraisal well in the Sabah area, offshore Malaysia.

Oil sector analysts at JPMorgan Cazenove noted that the Alma/Galia and Kraken projects remain on track. "These major projects at the main drivers behind EnQuest's medium term production growth, and they reduce EnQuest's reliance on third party infrastructure," they said.

EnQuest's results for 2012 showed that the firm's proved and probable reserves stood at 128.6 million barrels of oil equivalent at the start of 2013 – an 11-percent increase compared with the start of 2012. Meanwhile, the firm's UK production licenses increased from 22 at the start of 2012 to 39 by the end of the year – with 11 licenses coming from the UK's 27th Licensing Round. 

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

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EnQuest Cuts 2013 Production Forecast due to Brent Shutdown

North Sea-focused independent EnQuest reported Wednesday that it has reduced its guidance for production during the whole of 2013 by approximately 1,000 barrels of oil equivalent per day (boepd), mainly as a result of shutdowns involving the Brent pipeline during the first quarter.

Reporting its results for 2012, EnQuest said that it now expects average production for 2013 to come in at between 22,000 boepd and 27,000 boepd. For 2012, EnQuest reported average production of 22,802 boepd – down 3.8 percent on 2011.

Meanwhile, the firm added that it expects to drill 12 wells during 2013. These will include six production wells, three injection wells and three exploration/appraisal wells.

Capital expenditure for 2013 is expected to be approximately $750 million, with around $350 million invested in EnQuest's Alma/Galia development located on the P1825 license, Block 30/24b, in the UK North Sea. The development is scheduled to begin in 4Q 2013.

$75 million has been earmarked as pre-development expenditure for the North Sea's Kraken development prior to the submission of the project's field development plan. First oil from Kraken is targeted for 2016.

Appraisal wells will be drilled at Cairngorm and Kraken during 2013, while the firm also expects to drill an exploration/appraisal well in the Sabah area, offshore Malaysia.

Oil sector analysts at JPMorgan Cazenove noted that the Alma/Galia and Kraken projects remain on track. "These major projects at the main drivers behind EnQuest's medium term production growth, and they reduce EnQuest's reliance on third party infrastructure," they said.

EnQuest's results for 2012 showed that the firm's proved and probable reserves stood at 128.6 million barrels of oil equivalent at the start of 2013 – an 11-percent increase compared with the start of 2012. Meanwhile, the firm's UK production licenses increased from 22 at the start of 2012 to 39 by the end of the year – with 11 licenses coming from the UK's 27th Licensing Round. 

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

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EnQuest Cuts 2013 Production Forecast due to Brent Shutdown

North Sea-focused independent EnQuest reported Wednesday that it has reduced its guidance for production during the whole of 2013 by approximately 1,000 barrels of oil equivalent per day (boepd), mainly as a result of shutdowns involving the Brent pipeline during the first quarter.

Reporting its results for 2012, EnQuest said that it now expects average production for 2013 to come in at between 22,000 boepd and 27,000 boepd. For 2012, EnQuest reported average production of 22,802 boepd – down 3.8 percent on 2011.

Meanwhile, the firm added that it expects to drill 12 wells during 2013. These will include six production wells, three injection wells and three exploration/appraisal wells.

Capital expenditure for 2013 is expected to be approximately $750 million, with around $350 million invested in EnQuest's Alma/Galia development located on the P1825 license, Block 30/24b, in the UK North Sea. The development is scheduled to begin in 4Q 2013.

$75 million has been earmarked as pre-development expenditure for the North Sea's Kraken development prior to the submission of the project's field development plan. First oil from Kraken is targeted for 2016.

Appraisal wells will be drilled at Cairngorm and Kraken during 2013, while the firm also expects to drill an exploration/appraisal well in the Sabah area, offshore Malaysia.

Oil sector analysts at JPMorgan Cazenove noted that the Alma/Galia and Kraken projects remain on track. "These major projects at the main drivers behind EnQuest's medium term production growth, and they reduce EnQuest's reliance on third party infrastructure," they said.

EnQuest's results for 2012 showed that the firm's proved and probable reserves stood at 128.6 million barrels of oil equivalent at the start of 2013 – an 11-percent increase compared with the start of 2012. Meanwhile, the firm's UK production licenses increased from 22 at the start of 2012 to 39 by the end of the year – with 11 licenses coming from the UK's 27th Licensing Round. 

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

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Brent Pipeline System Restarts after 5-Day Shutdown

TAQA Bratani reported late Thursday morning (UK time) that the Brent pipeline system in the UK North Sea has restarted after a temporary shutdown March 2.

The company said that it has begun the process of restoring the flow of an estimated 80,000 barrels of oil per day (bopd) into the Brent pipeline system.

The pipeline system, operated by TAQA, was shut down Saturday after what the company described as a "small hydrocarbon release" was detected within one of the Cormorant Alpha platform's legs. Soon afterwards, TAQA removed 71 non-essential personnel from the platform as a precaution.

The leak was the second such incident to involve a particular leg of the Cormorant Alpha platform. In mid-January the Brent Pipeline System was shut down for several days after hydrocarbons were detected in the leg.

But TAQA said Thursday that investigations have found that there is no connection between the pipeline system and the pipeline involved in the release.

Cormorant Alpha usually handles approximately 90,000 bopd, feeding the Brent Pipeline System. According to Oil & Gas UK the fields that use the pipeline system account for around 10 percent of UK production.

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

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Crude-Oil Futures End Higher; Brent Spread to US Benchmark at 1-Month High

Crude-oil futures prices rose Friday amid continued hefty gains in U.S. equities price. Global benchmark Brent crude oil hit a 20-week high while worries over logistical problems at a key pipeline capped the rise in U.S. prices.

Brent's premium to the U.S. benchmark price on the New York Mercantile Exchange blew out by $1 a barrel, to $19.06 a barrel, the most since Jan. 3, after operators of the Seaway Pipeline said the key conduit may not be free from potential operational restraints until work on a new section of pipeline is completed near the start of the fourth quarter.

Seaway, the pipeline outlet for growing crude oil supplies from the Midwest to the key Gulf Coast refining hub, last month more than doubled operational capacity to 400,000 barrels a day last month. Anticipation that the higher flows to the Gulf from Cushing, Okla.--the delivery point of the Nymex contract--had driven U.S. crude prices higher, on the notion they would gain market share at the expense of costlier imports, priced against the value of internationally traded Brent.

While the spread did narrow briefly in January to its weakest level since July, at under $16 a barrel, news last week that operating problems cut the flow on the line to just 175,000 barrels a day, pushed it back out, with Brent galloping higher, at the expense of the U.S. benchmark.

U.S. crude also is held back by widespread seasonal refinery maintenance that is reducing near-term demand. Crude's modest support, analysts said, comes from carryover strength in petroleum products, which are climbing to their highest levels since early in the fourth quarter on anticipation that lower refinery output will tighten product inventories.

Seaway is "not doing what the market thought it would do originally," said Gene McGillian, analyst and broker at Tradition Energy, referring to the widening of the price spread between the benchmarks. Goldman Sachs said on Jan. 22, before the operational snag at Seaway, that it expected Brent's premium to the U.S. benchmark to erode steadily to $6 a barrel by the end of 2013.

Traders said Brent, which is exported globally, also is reflecting increased market tensions over recent unrest in Algeria and the Middle East.

Nymex light, sweet crude oil for March delivery settled 26 cents higher, at $97.77 a barrel, after trading in a range of $96.51 to $98.15 a barrel.

ICE March North Sea Brent settled 1.1%, or $1.21 a barrel, higher at $116.76 a barrel, the most since Sept. 13.

U.S. crude gained 2%, or $1.89 a barrel in the latest week, while Brent jumped 3.1%, or $3.48 a barrel.

Traders said the evolving issue regarding Seaway will be a major focus of the market in coming days, but there is concern that prices have become overvalued.

Matt Smith, commodity analyst at Schneider Electric in Louisville, Ky., said "the underlying fundamentals don't justify" U.S. crude oil futures approaching $100 a barrel.

"It was only a few weeks ago we were worried about OECD oil demand being weak," he said, referring to the major industrialized nations that comprise the Organization for Economic Cooperation and Development. "Now, we're swept up in the euphoria over equities."

Mr. McGillian at Tradition Energy said the "bulls still in charge, but we're reaching the point where we need to see new signs of strong demand" to justify gains.

Rising heating oil and gasoline prices also gained support from higher Brent prices, as their values are tied to the crude oil that is widely used by refiners on the Gulf Coast and the East Coast.

Front-month reformulated gasoline prices climbed in 11 of the past 12 sessions and in seven of the past eight weeks. March gasoline settled at $3.0536 a gallon, up 2.19 cents on the day and the highest level since Sept. 28.

March heating oil settled 4.19 cents higher, at $3.1606 a gallon, the highest price since Oct. 18.

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Crude-Oil Futures End Higher; Brent Spread to US Benchmark at 1-Month High

Crude-oil futures prices rose Friday amid continued hefty gains in U.S. equities price. Global benchmark Brent crude oil hit a 20-week high while worries over logistical problems at a key pipeline capped the rise in U.S. prices.

Brent's premium to the U.S. benchmark price on the New York Mercantile Exchange blew out by $1 a barrel, to $19.06 a barrel, the most since Jan. 3, after operators of the Seaway Pipeline said the key conduit may not be free from potential operational restraints until work on a new section of pipeline is completed near the start of the fourth quarter.

Seaway, the pipeline outlet for growing crude oil supplies from the Midwest to the key Gulf Coast refining hub, last month more than doubled operational capacity to 400,000 barrels a day last month. Anticipation that the higher flows to the Gulf from Cushing, Okla.--the delivery point of the Nymex contract--had driven U.S. crude prices higher, on the notion they would gain market share at the expense of costlier imports, priced against the value of internationally traded Brent.

While the spread did narrow briefly in January to its weakest level since July, at under $16 a barrel, news last week that operating problems cut the flow on the line to just 175,000 barrels a day, pushed it back out, with Brent galloping higher, at the expense of the U.S. benchmark.

U.S. crude also is held back by widespread seasonal refinery maintenance that is reducing near-term demand. Crude's modest support, analysts said, comes from carryover strength in petroleum products, which are climbing to their highest levels since early in the fourth quarter on anticipation that lower refinery output will tighten product inventories.

Seaway is "not doing what the market thought it would do originally," said Gene McGillian, analyst and broker at Tradition Energy, referring to the widening of the price spread between the benchmarks. Goldman Sachs said on Jan. 22, before the operational snag at Seaway, that it expected Brent's premium to the U.S. benchmark to erode steadily to $6 a barrel by the end of 2013.

Traders said Brent, which is exported globally, also is reflecting increased market tensions over recent unrest in Algeria and the Middle East.

Nymex light, sweet crude oil for March delivery settled 26 cents higher, at $97.77 a barrel, after trading in a range of $96.51 to $98.15 a barrel.

ICE March North Sea Brent settled 1.1%, or $1.21 a barrel, higher at $116.76 a barrel, the most since Sept. 13.

U.S. crude gained 2%, or $1.89 a barrel in the latest week, while Brent jumped 3.1%, or $3.48 a barrel.

Traders said the evolving issue regarding Seaway will be a major focus of the market in coming days, but there is concern that prices have become overvalued.

Matt Smith, commodity analyst at Schneider Electric in Louisville, Ky., said "the underlying fundamentals don't justify" U.S. crude oil futures approaching $100 a barrel.

"It was only a few weeks ago we were worried about OECD oil demand being weak," he said, referring to the major industrialized nations that comprise the Organization for Economic Cooperation and Development. "Now, we're swept up in the euphoria over equities."

Mr. McGillian at Tradition Energy said the "bulls still in charge, but we're reaching the point where we need to see new signs of strong demand" to justify gains.

Rising heating oil and gasoline prices also gained support from higher Brent prices, as their values are tied to the crude oil that is widely used by refiners on the Gulf Coast and the East Coast.

Front-month reformulated gasoline prices climbed in 11 of the past 12 sessions and in seven of the past eight weeks. March gasoline settled at $3.0536 a gallon, up 2.19 cents on the day and the highest level since Sept. 28.

March heating oil settled 4.19 cents higher, at $3.1606 a gallon, the highest price since Oct. 18.

Copyright (c) 2012 Dow Jones & Company, Inc.

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