Spread between U.S., European oil benchmarks tightens
NEW YORK -- The gap between U.S. and European crude futures narrowed Thursday on news that the much-watched Seaway pipeline expansion was close to entering service.
U.S. crude futures for February delivery was recently trading two cents lower at $93.10 per barrel, while its European counterpart, Brent futures, was trading 35 cents lower at $112.12.
The narrowing of the much-traded spread between the two benchmarks followed a news release Wednesday evening by the Seaway pipeline that said the planned expansion of the line from 150,000 bopd to 400,000 bopd would be complete by the end of next week. The expansion will allow larger volumes of crude to move from Cushing, Okla., to Gulf Coast refineries.
The expansion is seen as critical to alleviating a glut of oil at the U.S. trading hub of Cushing, where oil supplies have reached record levels. Kyle Cooper, analyst at IAF Advisors, said the spread between the two crude benchmarks should tighten further, although he noted that U.S. demand for crude remains very "tepid."
Analysts said Thursday' s retreat in oil prices constitutes profit-taking after crude settled at a three-month high on Wednesday. Oil rallied Wednesday after Washington lawmakers agreed on a tax measure to avert the so-called fiscal cliff. But by Thursday, more skepticism returned to the market over the uncertainty surrounding likely future fiscal spats in Washington.
Dow Jones Newswires