-- ICE Brent loses ground to Nymex on pipeline move

-- RBOB gasoline, linked to Brent, slips to lowest level since February

-- Traders await mid-morning EIA data after surprise in API report

 
   By David Bird 
   Of DOW JONES NEWSWIRES 
 

NEW YORK (Dow Jones)--Crude oil futures prices were weaker earlier Wednesday, as traders awaited direction from U.S. weekly oil inventories.

The data, due out at 10:30 a.m. EDT from the Energy Information Administration, comes as the recent price relation between U.S. and European benchmark crudes is undergoing an overhaul ahead of the reversal next month of a key pipeline.

Light, sweet crude for May delivery on the New York Mercantile Exchange was 40 cents lower, at $103.80 a barrel, after trading in a range of $103.55 to $104.51 a barrel.

ICE Brent for June delivery was down $1 at $117.78 a barrel, after moving in a range of $117.55 to $118.85 a barrel. Brent is on target to settle at its lowest price since mid-February.

The switch in the Seaway pipeline will move crude oil out of lofty storage at landlocked Cushing, Okla. to the Gulf Coast refining region, allowing more competition with crude imports whose prices are linked to North Sea Brent.

Crude futures on the New York Mercantile Exchange have been depressed in relation to world prices, due to the lack of sufficient infrastructure to move oil out of the Cushing delivery point for the contract.

The price of reformulated gasoline blendstock futures, tied closely to Brent values, have dropped with the decline of the European benchmark and hit their lowest levels since late February earlier Wednesday. Traditional price relations between retail regular gasoline and RBOB futures suggest that, if the weakness remains, pump prices wouldn't top $4 a gallon on a nationwide basis.

Brent's premium to the U.S. benchmark dropped to $14.58 a barrel at Tuesday's settlement, the lowest level since Feb. 1. Just two weeks earlier, with Brent near $125, the spread was nearly $21 a barrel. The spread dropped below $14 early Wednesday, still near the Feb. 1 settlement level.

Traders said Brent was also hit by concerns about potential for a new flare up in European debt problems. Spain's central bank said the ratio of bad loans held by the nation's banks rose to 17-year high in February.

Brent prices had been bid on as European buyers sought alternative supplies to Iranian crude oil, ahead of the European Union embargo set to take place July 1.

"Brent crude is swooning once again," said Matt Smith, analyst at Summit Energy. "European debt fears, with the spotlight specifically on Spain, has markets concerned about future oil-demand growth for Europe."

Near-term direction will come from U.S. oil inventory data. Traders are nervously awaiting the report after the American Petroleum Institute, a trade group reported a bigger-than-expected rise in crude oil stocks and a larger-than-forecast decline in gasoline stocks.

Analysts surveyed by Dow Jones Newswires expect weekly oil inventory data to show nationwide crude oil stocks rose 900,000 barrels last week, while refiners lifted refinery operations by 0.7 percentage point. The data also is expected to show gasoline stocks fell by 1 million barrels, while distillate stocks, comprising heating oil and diesel fuel, dropped by 300,000 barrels.

Late Tuesday, the API said crude stocks rose 3.4 million barrels, while refiners boosted operations by 0.1 percentage point. Gasoline stocks were reported down 2.6 million barrels, while distillate stocks were 2.4 million barrels lower, the trade group said.

The sharp drop in RBOB gasoline prices could be reversed if EIA data confirm the API figures, traders said.

Front-month May reformulated gasoline blendstock were 5.68 cents lower, at $3.1772 a gallon..

May-delivery heating oil was 1.53 cents lower, at $3.1113 a gallon.

-By David Bird, Dow Jones Newswires; 212-416-2141; david.bird@dowjones.com

(END) Dow Jones Newswires

April 18, 2012 09:47 ET (13:47 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.