U.S. benchmark crude oil futures settled slightly weaker Friday, capping turbulent trading with a wary outlook on whether a brewing storm will pose a threat to key U.S. Gulf Coast oil production and refining operations.
Meantime, prices of ICE North Sea Brent crude, the widely traded European benchmark, dropped more than 1% on increased talk about the potential for a release of emergency consumer-held oil reserves in response to stubbornly high oil prices.
Maria Van Der Hoeven, the executive director of the International Energy Agency, which coordinates energy policies and management of emergency stockpiles for the major industrial nations, said a week ago there was "no reason" to tap the strategic reserves, given current market conditions.
But Brent prices hit the skids late Friday on a report on the website of the Petroleum Economist, a monthly industry journal, which quoted "several sources" saying that a release could come some as soon as September, in response to reduced supplies from Iran. The report said the flow from the reserve could be as much as or more oil than the 60-million-barrel release last year after Libya's supplies were cut by civil war.
The report said one source said the IEA, which has opposed the plan, now supports it, but has asked the U.S. not to make a unilateral release. Talk among traders is that U.S. President Barack Obama, who is running for reeelection in November, may feel political pressure to tap the reserve as retail gasoline prices, spurred by gains in crude oil, have climbed to three-month highs and top year-earlier levels.
Traders said that while they didn't give credence to the latest report, market players appeared to be selling the ICE Brent contract more readily than the Nymex contract, taking profit on a jump in the price differential.
ICE Brent prices gained 11.4% over the past month, rising on worries about reduced supplies from Iran and North Sea oil field maintenance work, while the U.S. benchmark's rise in the month has been lower, at 9.2%.
"There has been a lot of profit-taking on the spread today," said Gene McGillian, analyst and broker at Tradition Energy.
October-delivery crude oil futures on the New York Mercantile Exchange settled down 12 cents, at $96.15 a barrel. The contract hit a $97.17 intraday high after BP PLC said it was closing its Thunder Horse field in the Gulf of Mexico as a precaution ahead of Tropical Storm Isaac, which is expected to reach the Gulf early next week as a low level hurricane.
ICE October Brent crude settled 1.2%, or $1.42 a barrel lower, at $113.59 a barrel, the lowest price since Aug. 10. The one-day drop was the biggest since last Friday. Brent's premium to Nymex crude was $17.44 a barrel at the settlement, the lowest level since Aug. 6.
September reformulated gasoline blendstock futures fell 1.2%, or 3.78 cents a gallon, to $3.078 a gallon. The drop, which was the biggest in a week, came after prices settled at their highest level since April 30 on Thursday.
Heating oil for September settled down 2.29 cents, at $3.1101 a gallon. The drop was the biggest in a week and knocked prices down from their highest level since May 2 at Thursday's settlement.
Copyright (c) 2012 Dow Jones & Company, Inc.
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