Brent oil futures rose above $98 a barrel on Wednesday on supply concerns in the North Sea, but a stuttering economic recovery in the United States kept prices off the key $100 level and saw US crude ease for a second day. Trading sources said Hetco, a trading firm partly owned and backed by US energy giant Hess Corp, has taken control of ten North Sea crude oil cargoes, which traders said give it more influence over the spot market.
Tighter supplies in the North Sea and soaring emerging market demand for oil has pushed Brent crude oil futures close to $100 a barrel for the first time since October 2008. By contrast, US crude futures have traded at an uncommon discount to Brent since August, with bulging inventories around the delivery point for the NYMEX contract in Cushing, Oklahoma weighing on prices.
"It's a story of relative supply," said Andy Lebow, a trader at MF Global in New York. "Brent has seen tight supplies and good demand from Asia, while the expectations are supplies will remain at high levels around Cushing." In London, ICE Brent crude for March rose 35 cents, to $98.15 a barrel at 2:24 pm EST (1924 GMT), just over a dollar below the 27-month high of $99.20 hit last Friday.
US crude oil futures for February delivery fell 66 cents to $90.72 a barrel, one day ahead of the contract's expiry. The contract for March delivery traded down 62 cents to $91.69. US oil product futures were stronger, with expectations for cold weather in the US North East through the middle of next week boosting heating oil to a 27-month high of $2.6759 a gallon. RBOB gasoline futures were up 0.3 percent just below $2.50 a gallon.Tim Evans, an analyst at Citigroup Futures Perspective in New York, said a dip in US equity markets was, "shifting the immediate focus from a weaker US dollar to worries over the strength of the US recovery".
The International Energy agency has revised its 2011 global oil demand forecast higher to 89.13 million barrels per day (bpd), an all-time record, but said Opec leader Saudi Arabia was quietly boosting output to cool the oil price rally. Analysts and traders, however, including some of the Kingdom's big customers, were sceptical and said that Saudi output was flat in December. Rising demand with no clear increase in supply from the producer group has been one of the factors pushing Brent towards $100.
For now, technical analysts saw oil as neutral and said Brent was unlikely to breach the 27-month high of $99.20 reached last week. In the United States, oil supplies looked set to improve, with Alaska's main oil pipeline about to restore shipments to its normal rate of 630,000 barrels bpd in the coming days from around 510,000 bpd, after its recent shutdown due to a leak.
The release of weekly US industry and government oil inventory data this week will be delayed a day following a national holiday earlier this week. The American Petroleum Institute issues its weekly oil inventory report at 4:30 pm EST (2130 GMT) on Wednesday, while the US Energy Information Administration's report will be published 11 am EST on Thursday. US crude oil inventories were forecast to have fallen by 600,000 barrels last week while gasoline and distillate stocks were expected to be higher, according to a Reuters poll.
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