* Spanish debt auction smooth, supports oil, equities
* Brent/U.S. crude spread narrows
* Coming up: API U.S. oil data 4:30 p.m. Tuesday
(Recasts, updates through settlements)
By Robert Gibbons
NEW YORK, April 17 (Reuters) – Brent crude edged up on
Tuesday as an upcoming pipeline reversal, aimed at alleviating
oversupply in the central United States, bolstered U.S. oil
futures at the expense of the higher-priced European benchmark.
A well-received Spanish debt auction and a
better-than-expected German economic sentiment reading helped
support Brent, added lift to U.S. crude and pushed European and
Wall Street share prices higher.
Brent’s premium to its U.S. counterpart
narrowed
to below $14 a barrel intraday and spread unwinding continued to
be a primary market factor, analysts and traders said, after
Monday’s news that the Seaway pipeline’s crude oil flow will be
turned around toward the Gulf Coast as early as mid May.
The reversal is expected to ease a supply glut in the U.S.
Midwest that has weighed on U.S. benchmark crude prices.
Also helping to stymie Brent and reduce the premium to U.S.
crude were Saturday’s talks about Iran’s nuclear program. The
revived discussions with Tehran and major powers eased the
threat of immediate supply disruptions in the region.
The specter of a regional conflict as Iran declined to curb
its disputed nuclear program helped Brent prices surge to a 2012
peak above $128 a barrel in March, a 19-percent rise from the
end of 2011.
Recovering Libyan oil exports and higher output from Saudi
Arabia and Iraq helped check the price surge, along with the
West mulling releases from strategic reserves as governments
around the globe fretted about the effect of high oil prices on
economic growth.
Brent June crude edged up 10 cents to $118.78 a
barrel, having swung between $117.98 and $119.34.
U.S. May crude futures rose $1.27 to settle at
$104.20, the highest close since April 2, after reaching
$105.07. The May contract expires on Friday.
The spread unwinding came as total Brent crude trading
volume outpaced U.S. crude turnover. Volume was above the 30-day
average for both contracts.
“The Brent-WTI unwind is the primary feature today,” said
John Kilduff, partner at Again Capital LLC.
“The Spain debt saga is also helping as is the IMF economic
growth outlook revision.”
Global growth is slowly improving as the U.S. recovery gains
traction and dangers from Europe recede, though risks remain in
a fragile situation, the International Monetary Fund said in its
world economic outlook on Tuesday.
Spanish bond yields eased after a better-than-expected
short-term debt sale boosted confidence before a longer-term
debt auction later in the week.
Supportive to oil and tempering anxiety about the euro zone,
German analyst and investor confidence rose unexpectedly in
April to its highest level since June 2010.
U.S. RBOB gasoline futures ended 1 percent lower,
while heating oil managed a penny gain.
“I think it’s the big unwind of two markets, Brent and RBOB,
that were out of proportion to the rest of the complex,” said a
New York-based broker.
U.S. gasoline demand last week fell 6.8 percent from a year
ago as high prices and rising fuel efficiency pressure
consumption, MasterCard said in a weekly report.
IRANIAN WILD CARD
While the resumption of negotiations between Iran and the
five permanent U.N. Security Council members and Germany helped
temper fears of regional supply disruption, the possibility that
the talks will get derailed persists.
The United States intends to maintain sanctions and other
pressure on Iran as Tehran considers what it will bring to the
table in the next round of talks.
Iran’s foreign minister was quoted earlier as saying his
country was ready to resolve all nuclear issues if the West
started lifting sanctions.
U.S. OIL INVENTORIES
Weekly reports on U.S. oil inventories are expected to show
crude stocks rose last week, even after the largest three-week
build in more than three years, according to a Reuters survey of
analysts.
Distillate inventories were expected to have slipped 200,000
barrels, while gasoline stocks were estimated to have fallen.
The report from industry group the American Petroleum
Institute is due at 4:30 p.m. EDT (2030 GMT) on Tuesday, with
the government’s report from the U.S. Energy Information
Administration to follow on Wednesday.
(Additional reporting by Julia Payne and Christopher Johnson in
London and Jessica Jaganathan in Singapore; Editing by
Marguerita Choy and Bob Burgdorfer)
