Brent Oil Drops From Nine-Month High, Narrows Premium Ove

Brent slipped from a nine-month high in London, narrowing its premium to West Texas Intermediate crude for the first time in nine days. WTI fell below $95 for the first time since Jan. 23.

The European benchmark fell as much as 0.9 percent after its fourth straight weekly increase, the longest run of gains since July. European finance chiefs were set to meet in Brussels today as a tightening election contest in Italy and corruption allegations in Spain threaten to reignite the region’s debt crisis. Iran won’t cede to pressure to halt its nuclear work, President Mahmoud Ahmadinejad said yesterday in Tehran.

Brent for March settlement was at $117.57 a barrel, down $1.33, on the ICE Futures Europe exchange at 1:38 p.m. London time. The number of futures exchanged was 8 percent below the 100-day average. The contract increased $1.66 to $118.90 on Feb. 8, the highest since May 1. The European benchmark grade was at a premium of $22.52 to the U.S. benchmark, WTI. The gap had closed at $23.18 on Feb. 8, the widest since Nov. 26.

“The market in London is long due a correction,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. Some market participants “already eye resistance at $120. Demand destruction advocates will become louder.”

The Brent-WTI spread had widened since Enterprise Product Partners LP said Jan. 31 that capacity will be limited until late 2013 on its Seaway pipeline to the Gulf Coast from Cushing, Oklahoma, the delivery point for the New York contract.

China Imports

WTI crude for March delivery was at $95.05 a barrel, down 67 cents, in electronic trading on the New York Mercantile Exchange. Earlier today it dipped below $95. The volume of all contracts traded was 28 percent above the 100-day average.

Goldman Sachs Group Inc. forecast that the Brent-WTI spread will shrink to $7.50 a barrel in the second quarter as new pipeline capacity relieves a build-up of crude at Cushing, New York-based Head of Commodities Research Jeffrey Currie wrote in a report.

Brent futures gained on Feb. 8 after China reported that net crude imports were 24.87 million metric tons, according to data from the General Administration of Customs. That’s equivalent to about 5.88 million barrels a day, the most since May.

$130 Risk

“With GDP growth set to accelerate in the second half of 2013 and limited supplies, we see a growing risk of Brent prices spiking to $130 a barrel this year,” Francisco Blanch, head of commodities research at Bank of America Corp. in New York, said in a report dated Feb. 10.

Speculative behavior was mixed for the world’s two main crude oil futures contracts in the latest weekly reporting period.

Hedge-fund managers and other large speculators cut their net-long position in WTI for the first time in eight weeks, according to Commodity Futures Trading Commission data. Managed money bets that prices will rise outnumbered short positions by 212,226 futures and options combined, a decline of 6,378, or 2.9 percent, in the week ended Feb. 5, the regulator said in its weekly Commitments of Traders report on Feb. 8. In London, money managers raised bullish bets on Brent crude to their highest level in two years for a third consecutive week, data from ICE Futures Europe show.

Brent Net-Longs

Speculative bets that prices will increase outnumbered short positions by 192,195 lots, the London-based exchange said today. That’s up by 12,460 lots, or 6.9 percent, from 179,735 in the previous week, and brings net-longs to their highest since at least January 2011, the earliest point for which the data are available.

Royal Dutch Shell Plc will require buyers to pay a premium for forward sales of North Sea crude to compensate for differences in the quality of benchmark oil grades. The price of Brent, Ekofisk and Oseberg oil sold under 25-day forward contracts will be adjusted by a premium based on their price difference relative to the Forties grade, Shell said in an amendment to its so-called SUKO 90 terms and conditions published on Feb. 8.

The average price for regular gasoline at U.S. pumps rose 24.75 cents a gallon in the past two weeks to $3.5918 a gallon, according to Lundberg Survey Inc.

The survey covers the period ended Feb. 8 and is based on information obtained from about 2,500 stations by the Camarillo, California-based company. The average is up 8.17 cents from a year earlier. It was the biggest jump since the two weeks ended March 4, 2011.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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