- June 13th, 2011
Crude Declines in New York, Advances in London to Boost Spread to Record
Crude oil fell in New York and climbed in London, bringing the spread between the U.S. and U.K. benchmarks to a record, as supply disruptions in Libya and the North Sea bolstered demand for the European grade.
In London, prices climbed as much as 1.2 percent as a rebellion against Libyan leader Muammar Qaddafi cut the country’s oil output by almost 90 percent, and as maintenance curbed the flow from the Buzzard field off the British coast. Saudi Arabia signaled its readiness to keep markets adequately supplied after the collapse of OPEC talks last week.
“Brent is higher because of the loss of Libyan oil and concerns about the quality of the additional Saudi barrels,” said Phil Flynn, vice president of research at PFGBest in Chicago. “All of the fear premium is in Brent. Here we have plenty of supply and weak demand.”
Crude oil for July delivery fell $1.14, or 1.1 percent, to $98.15 a barrel at 9:30 a.m. on the New York Mercantile Exchange. Futures are up 33 percent in the past year.
Brent crude oil for July delivery climbed $1.07, or 0.9 percent, to $119.85 a barrel on the London-based ICE Futures Europe exchange.
The North Sea grade traded at a $21.70-a-barrel premium to the U.S. contract today. The European oil was $6.06 more expensive on average over the past year.
Saudi Arabia will increase production, though it’s too early to say by how much, an industry official with knowledge of the matter who declined to be identified said on June 10. The al-Hayat newspaper, citing senior officials, reported that the kingdom will boost output to 10 million barrels a day in July from the current 8.8 million.
“The rate of growth in global demand remains an important unknown,” said Christopher Bellew, senior broker at Bache Commodities Ltd. in London. “Sentiment now is that demand may grow faster than OPEC’s appetite to increase output. I think the reality will be that Saudi production continues to creep up.”