Brent Oil Rises to Nine-Month High on China

Brent crude surged to a nine-month high in London while oil in New York slipped after stronger-than-expected trade data from China signaled increased fuel demand in the world’s second-biggest consuming country.

The European benchmark grade’s premium to West Texas Intermediate oil in New York strengthened for an eighth day. China’s exports rose 25 percent in January from a year earlier and crude imports increased to an eight-month high, customs figures showed. Goldman Sachs Group Inc. said oil markets will “remain tight” in the first quarter and may push prices above its forecasts.

“Speculation that physical markets in Asia are tight and will get tighter is having a much bigger impact on Brent than WTI,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “The strong oil import data out of China was very supportive.”

Brent oil for March settlement rose $1.66, or 1.4 percent, to end the session at $118.90 a barrel on the London-based ICE Futures Europe exchange, the highest closing price since May 1. The volume of all futures traded was 38 percent higher than the 100-day average.

WTI crude oil for March delivery dropped 11 cents to settle at $95.72 a barrel on the New York Mercantile Exchange. Volume was 31 percent more than the 100-day average. The contract fell 2.1 percent this week, after advancing 14 percent over the previous eight.

Widening Spread

The European benchmark grade’s premium to WTI strengthened to $23.17, the most since Nov. 26. The Brent-WTI spread has 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.

“The WTI-Brent spread has widened every day since the Enterprise announcement,” Armstrong said. “The spread had been shrinking on speculation that Seaway would be operating at full capacity but now those bets have to be wound down.”

Brent’s gain has been driven by improving fundamentals not an increasing risk premium, Stefan Wieler, an analyst at Goldman Sachs in New York, said in a report dated yesterday. Prices may exceed the bank’s forecasts, which for Brent futures are at $110 a barrel for the next three to six months, and at $105 in 12 months. For WTI, Goldman projects a level of $102.50 in three months, $105 in six and $97 in 12 months.

Chinese Imports

China bought 24.87 million metric tons of crude more than it exported last month, data published today on the website of the Beijing-based General Administration of Customs showed. That’s equivalent to 5.88 million barrels a day, the most since May, data compiled by Bloomberg show.

U.S. crude inventories gained 2.62 million barrels to 371.7 million last week, the Energy Information Administration said Feb. 6. Production advanced 4,000 barrels a day to 7 million in the week ended Feb. 1, 21 percent higher than a year earlier.

“Brent is the more dynamic market right now because the U.S. remains very well supplied,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York.

Record fuel exports helped shrink the U.S. trade deficit to a two-year low as America moves closer to achieving energy self-sufficiency. The gap shrank 20.7 percent to $38.5 billion, the least since January 2010, the Commerce Department said today. The jump in petroleum exports came as the number of imported crude barrels fell to the lowest in almost 16 years.

‘Abundant’ Supply

“The Brent-WTI spread should drop soon because abundant U.S. supply is finding its way onto the world market,” Evans said. “U.S. crude imports fell to the lowest level since 1997, which is making additional barrels available elsewhere. Fuel exports are surging, another way the U.S. abundance is being shared.”

U.S. fuel prices advanced more than WTI on speculation that a snowstorm in the Northeast will boost heating oil use. This sent refinery profit margins, as expressed by the so-called crack spread, rising to the highest level in almost four months.

The gain from processing three barrels of crude into two of gasoline and one of heating oil, based on New York futures settlement prices, increased $2.3038 to $35.264 a barrel, the highest level since October.

Heating oil for March delivery increased 3.89 cents, or 1.2 percent, to $3.2384 a gallon, the highest settlement since Oct. 11. Gasoline for March delivery advanced 5.89 cents, or 2 percent, to $3.0588, the highest close since Sept. 28.

Price Outlook

WTI may fall next week as technical indicators signal that prices rose too quickly, a Bloomberg survey showed. Eighteen of 37 analysts and traders, or 49 percent, forecast crude will decline. Twelve respondents, or 32 percent, predicted an increase and seven forecast little change.

The relative-strength index of front-month oil futures rose above 74 at settlement on Jan. 30, the highest level since Feb. 24, 2012. The RSI was at 55 today.

Electronic trading volume on the Nymex was 608,627 contracts as of 3:29 p.m. It totaled 770,907 contracts yesterday, 48 percent above the three-month average. Open interest was 1.62 million, the highest since Sept. 14.

Before it's here, it's on the Bloomberg Terminal.