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Oil Near Low Before Jobs Report; Brent Premium Widens

Oil traded near a six-week low before a report forecast to show the U.S. added fewer jobs last month than in December. Brent crude’s premium to the comparable New York contract is set for the largest weekly gain in a month.

Futures were little changed after dropping for a fifth day yesterday in the longest losing streak since August. The U.S. added 140,000 jobs last month after gaining 200,000 in December, according to a Bloomberg News survey of economists before a U.S. Labor Department report today. London-traded Brent’s premium to West Texas Intermediate crude, the U.S. benchmark, widened 34 percent this week to the most since Nov. 12.

“Investors will be watching the release of the jobs data, which is a key leading indicator for economic activity and therefore energy demand,” said Michael McCarthy, chief market strategist at CMC Markets Asia Pacific Pty in Sydney. “Concerns about demand has led to some pretty heavy selling in West Texas. Brent has held its ground, so we have seen that spread widen.”

Crude for March delivery was at $96.56 a barrel, up 20 cents, in electronic trading on the New York Mercantile Exchange at 1:32 p.m. Singapore time. The contract fell 1.3 percent to $96.36 yesterday, the lowest since Dec. 19. Prices are down 3.1 percent this week, the most since the week ended Dec. 16.

Brent oil for March settlement climbed as much as 0.4 percent to $112.47 a barrel on the ICE Futures Europe exchange. It gained 51 cents, or 0.5 percent, to $112.07 yesterday and is up 0.8 percent this week. The European benchmark contract’s premium to WTI was at $15.92, the widest in 12 weeks.

Cushing Supplies

West Texas futures fell this week on signs of surging stockpiles at the Cushing, Oklahoma, delivery point for the New York contract as output increased in Canada and North Dakota.

Inventories at Cushing climbed by 1.48 million barrels to 30.1 million in the week ended Jan. 27, the highest level since Dec. 16, according to U.S. Energy Department released Feb. 1.

The supply increase has pushed the March contract to a discount of $2.61 a barrel to December futures. This market situation, known as a contango, means later deliveries are more expensive than prompt supplies. As recently as Jan. 3, the nearer-term contract was at a premium of $1.85.

As stockpiles at Cushing increased 6.5 percent in the past two weeks, WTI’s discount to Brent crude, the European benchmark, widened to $15.71 a barrel Feb. 2 from $9.90 on Jan. 18 on the ICE Futures Europe exchange in London.

Demand Driven

“The big increase in inventories in the U.S. has led to weakness in West Texas,” said CMC’s McCarthy. “Normally oil is a supply-side equation, but the trading overnight was more demand-side driven.”

U.S. gasoline consumption decreased to 7.97 million barrels a day, the lowest since September 2001, according to the Energy Department data. Stockpiles of the fuel increased 3.02 million barrels last week, the report showed.

OPEC will increase shipments this month on rising winter demand in the northern hemisphere, according to tanker-tracker Oil Movements.

The Organization of Petroleum Exporting Countries will ship 23.52 million barrels a day in the four weeks to Feb. 18, 1.1 percent more than the 23.26 million barrels in the period to Jan. 21, the Halifax, England-based researcher said today in an e-mailed report. The figures exclude Angola and Ecuador.

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