* U.S. crude oil stock build threat spurs early spread
* U.S. employment growth posts modest improvement
* Dow hits 14,000 for first time since Oct. 2007
(Updates with settlement prices)
By Gabriel Debenedetti
NEW YORK, Feb 1 Brent crude rose to a four-month
peak on Friday, with traders citing optimism about the global
economic recovery, while Brent's premium over U.S. oil futures
widened nearly $1 a barrel in heavy spread trading.
Brent's premium to West Texas Intermediate rose on
expectations of swelling inventories at Cushing, Oklahoma, the
delivery point for U.S. oil futures.
The spread had narrowed with the start up of the expanded
Cushing-to-Texas Seaway pipeline, which had been expected to
draw down Midwest inventories bulging from rising North American
But traders said stocks at Cushing could keep building
because the pipeline may not be able to run at full capacity of
400,000 barrels per day until the second half of the year. This
should keep pressure on U.S. crude prices.
"The realization that the Seaway pipeline reversal is an
answer to almost none of the crude oil backlog issues in the
Midcontinent is weighing on WTI prices outright and especially
in relation to Brent crude oil prices," said John Kilduff,
partner at Again Capital LLC in New York.
"It's as if they built a pipeline to nowhere. There was a
bout of irrational pipeline exuberance."
Some market players said Friday's spread move may have been
exacerbated by a hedge fund adjusting a major position to take
this into account.
Brent rose for the third straight week and posted
its biggest weekly gain in two months. U.S. crude rose for an
eighth straight week, matching a similar winning streak in
Brent futures for March rose to a high of $117.07 a barrel,
its highest since September. Front-month Brent settled up $1.21
to $116.76 a barrel. For the week, Brent futures gained $3.48,
or 3 percent.
U.S. crude gained 28 cents to trade at $97.77,
erasing earlier losses. For the week, U.S. crude futures gained
$1.89, nearly 2 percent.
Trading volumes were heavy, with U.S. crude volumes nearly
60 percent over the 30-day moving average, while Brent volumes
were more than 40 percent over that average.
During the U.S. trading day the discount of the front-month
U.S. contract to Brent crude futures widened out to over $19 a
barrel, the highest level since before the Seaway line reopened
with expanded throughput capacity earlier this month. The spread
between WTI and Brent settled at $18.99 a barrel, compared with
$18.06 on Thursday.
Positive U.S. employment numbers boosted crude prices in
early U.S. trading, easing worries after separate data this week
showed the world's top economy contracted in the fourth quarter.
U.S. employers added 157,000 jobs to their payrolls last
month, the Labor Department said. The U.S. unemployment rate
edged up 0.1 percentage point to 7.9 percent and revisions
showed employment gains in the prior two months were bigger than
Global manufacturing activity also rebounded in January, its
biggest monthly rise since August 2009 according to a business
U.S. stocks climbed to a five-year high. The Dow Jones
industrial average hit 14,000 for the first time since
mid-October 2007 and the S&P hit its highest point since
Meanwhile, a pair of surveys on China's factory output
offered diverging views on the pace of the recovery of the
world's second largest oil consumer.
The official purchasing managers' index (PMI) missed market
expectations, while a private PMI survey released by HSBC showed
growth among manufacturers quickening to a two-year high.
Worries about Brent supply due to conflict in the Middle
East also pushed its price up. A suicide bomber killed a Turkish
security guard at the U.S. embassy in Ankara on Friday.
The attack further increased tensions in the region after
Israel bombed targets in Syria earlier in the week.
(Additional reporting by Robert Gibbons in New York, Ron Bousso
in London and Jessica Jaganathan in Singapore; Editing by
Christopher Johnson, Leslie Gevirtz and David Gregorio)