Brent crude oil futures rose to three-month highs on Thursday, widening its premium over U.S. crude, concerns about rising crude stockpiles in the U.S. Midwest prompted heavy trading based on the spread between the two benchmarks.
Brent's premium to U.S. crude jumped to $18 a barrel for the first time since early January. Traders cited concerns about stockpiles at the Cushing, Oklahoma delivery point for the U.S. contract, which have pushed to record highs.
Traders focused on the timeline for the resumption of previous throughput levels on the Cushing-to-Texas Seaway pipeline, which started up in early January. The line will move U.S. and Canadian crude to the Gulf Coast, where it fetches a premium.
Seaway was forced last week to restrict throughput on the southernmost leg of the line to Jones Creek, Texas, after a key refinery customer began maintenance. Operator Enterprise Product Partners said on Thursday a key pipeline connection to Houston, which will create another outlet for oil moving into Jones Creek terminals, will be completed in the second half of the year.
Front-month February U.S. gasoline futures snapped 10 straight days of gains that had tacked 12 percent on to the price as the contract headed into expiry at settlement.
Brent crude futures rose 65 cents to settle at $115.55 a barrel, the highest settlement since mid-October, reaching a session peak of $115.76. For the month, Brent crude futures gained $4.44, or 4 percent.
The spread between Brent and U.S. crude settled at 18.06 as U.S. crude lost 45 cents to settle at $97.49 a barrel, a say after it hit the highest price in more than four months. For the month, U.S. light, sweet crude gained $5.67, or 6.17 percent.
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Trading was heavy on the U.S. contract, up nearly 35 percent over the 30-day moving average, while Brent volumes were closer to normal levels for that period.
Expiring February RBOB gasoline futures settled down 0.0091 cents at $3.0258 a gallon. The more heavily traded March contract, which will become the front month on Friday, also fell.
The market was also balancing U.S. data showing unemployment benefits claims rose last week against positive euro zone sentiment data from Wednesday and U.S. Federal Reserve comments that it would maintain its stimulus plan until the economic outlook improves substantially.
Investors have been closely watching economic data from top consumers for signs that sluggish fuel demand will improve.
"The oil complex, over the last one or two weeks, has moved back in sync with what's happening with the economy," said Dominick Chirichella, senior partner at Energy Management Institute in New York.
Market players said oil price movements could be limited until Friday's release of U.S. nonfarm payrolls data and official manufacturing data out of China, which is expected to show factory activity picking up pace.
"We see persistent macro-driven trading for oil with much attention paid to the U.S. non-farm payrolls report tomorrow," said VTB Capital oil strategist Andrey Kryuchenkov.
"Gasoline is just retracing a little bit from a bit much of an over-reaction yesterday. I don't think the inventories were signaling that we're going to have a shortage of gasoline anytime soon," Chirichella said, referring to a stockbuild in the East Coast last week reported by U.S. Energy Information Administration on Wednesday.
Supply Tensions
Supply worries stemming from tensions in the Middle East kept buoying prices for Brent, the main gauge for global oil prices.
Syria warned on Thursday of a possible "surprise" response to an Israeli attack on its territory, and Russia condemned the strike as an unprovoked violation of international law.
Tension over Iran's uranium enrichment plan continued to bubble after a plan to upgrade its refining equipment was delivered to the U.N. nuclear agency.
Such a step could enable Iran to refine uranium faster than it can at the moment and increase concerns in Western states and Israel about the goals of Tehran's nuclear program, which they fear has military aims. Iran says its work is peaceful.