* Correlation between Brent, U.S. crude breaks down in
Asian trade
* U.S. crude set to fall back towards $88-technicals
[]
* Coming Up: U.S. non-farm payrolls for December; 1330 GMT
(Updates prices)
By Alejandro Barbajosa
SINGAPORE, Jan 7 (Reuters) - Brent crude fell 0.8 percent
on Friday to below $94 as a stronger dollar curbed the appeal
of commodities for investors, while U.S. crude posted a small
gain as traders unwound short positions after a fire shut down
a Canadian oil sands facility.
Brent crude for February <LCOc1> fell 79 cents to $93.73
at 0720 GMT, about $5 higher than U.S. crude benchmark West
Texas Intermediate <CLc1>, which gained 8 cents to $88.46,
still on track for a weekly drop of about 3 percent.
"It seems to me that WTI was oversold compared to Brent
and that is why it is correcting," said Tony Nunan, a risk
manager with Tokyo-based Mitsubishi Corp.
On Thursday, WTI dropped $1.92, while Brent shed 98 cents.
"They may have bought Brent expecting the spread to widen
as it did and now they are taking profit," Nunan said.
"With the back of both the Brent and WTI curves down, it's
an anomaly at the front of the WTI curve."
A jump last week in crude stored at the Cushing, Oklahoma
hub, the delivery point for WTI, caused the U.S. benchmark
grade to trade at a discount as wide as $6.55 a barrel on
Thursday.
"We doubt that such a large spread will be sustainable,"
Credit Suisse analysts including Stefan Graber said. "With the
end of the winter season in February-March, energy prices may
face further downward pressure."
The rebound in U.S. crude broke the correlation between
the two main futures benchmarks at least temporarily.
A fire broke out on Thursday at Canadian Natural Resources
Ltd's Horizon Oil Sands facility in northern Alberta,
forcing a production shutdown. The Cushing hub mostly
receives crude produced from Canadian oil sands. []
"Someone is unwinding a WTI/Brent position in Asian time,"
said Ken Hasegawa, a commodity derivatives manager at Japan's
Newedge brokerage.
"In the last two days, the spread had widened a dollar per
day. It's possible that there is someone who has to cut losses
this morning."
U.S. crude prices have had a turbulent first week of the
year, seesawing in a range of almost $5 after touching a
27-month high of $92.58 a barrel on Monday. Front-month
February crude was up 50 cents at $88.88 at 0300 GMT, having
touched $87.85 on Thursday, the lowest intraday price since
Dec. 20.
Strength in price, trading volumes and market structure of
Brent crude has helped to lure some of the big investment
money that has typically favoured U.S. oil futures.
[]
Thursday's Brent premium to U.S. crude was the widest
level since it hit $6.57 on May 13, 2010. If the premium
pierces that seven-month high, it would be the widest since
Feb. 12, 2009, when it rose above $10 on an intraday basis.
Brent's strength has been spurred by continued strong
Asian demand and robust European product markets, while U.S.
crude has been pressured by an extended build in stockpiles at
Cushing, despite a drop in national stocks over the last five
weeks.
The oil market's attention was also on Friday's U.S.
monthly payroll report. Revised forecasts in a Reuters poll
showed expectations that December U.S. nonfarm payrolls jumped
175,000 after November's small gain of just 39,000.
[]
The euro slumped to a four-month low against the dollar on
Friday and looked set for more weakness if U.S. payrolls data
meets the recently raised forecasts, strengthening the case
for a sustainable economic recovery.
In other markets, Japan's Nikkei average edged up to a
fresh eight-month closing peak on Friday as investors stayed
cautious ahead of the key U.S. jobs report, while a drop in
commodity prices was offset by a strong performance by Chinese
equities.
(Additional reporting by Florence Tan; Editing by Ed Lane)
