* China lifts lenders' reserve rates requirement
* Brent premium over U.S. crude at 23-month highs of $8/bbl
* February Brent nears expiry, March contract priced lower
* Coming Up: U.S. retail sales, industrial output, Michigan
(Adds quotes, updates prices)
By Zaida Espana
LONDON, Jan 14 (Reuters) - Oil weakened on Friday after
China lifted lenders' reserve rate requirements by 50 basis
points to tame inflation.
China's move was the seventh increase since early 2010,
prompting worries that Beijing's appetite for buying
commodities, and oil, could lessen. []
[]
By 1214 GMT, U.S. crude oil futures (WTI) fell by $1.25 to
$90.15 a barrel while February's Brent crude contract <LCOc1>
was 19 cents stronger at $98.25 a barrel before expiring on
Friday; pushing Brent's premium over the other benchmark to
23-month highs of over $8 a barrel. []
"It was widely expected (China) would try to tighten the
monetary base further," Commerzbank's Eugen Weinberg said. "It's
not actually surprising that they are trying to take steam out
of the economy."
"The market was pricing in the perfect world, and (...)
although not unexpected this might change sentiment and provoke
profit-taking," he said.
Gold prices <XAU=> hit a low of $1,366.95 an ounce after
China's announcement, while European equity indices also
extended losses. []
A flurry of data from the world's largest oil consumer, the
United States, which keep inventors busy later in the session,
with December retail sales and the consumer price index due at
1330 GMT, followed by industrial production data at 1415 GMT and
the Reuters/University of Michigan consumer sentiment at 1455
GMT. []
BRENT-WTI DIVORCE DEEPENS
The discount for U.S. crude futures against Brent reached
fresh 23-month highs over $8 a barrel on Friday, the widest
discount since February 2009. []
Brent has traded above U.S. crude since August last year,
supported by a combination of dwindling North Sea crude supplies
and disruption of oil grades priced off it, traders said.
[]
However, the expiry of the February Brent futures contract
on Friday was expected to erode some of the strong differential,
as February traded around $1 stronger than March, analysts said.
"We are not convinced that the extreme front premium of
Brent to WTI (March or April) can be sustained," Petromatrix's
Olivier Jakob wrote in a note.
Brent's March contract <LCOc2>, which will become the front
month on Monday, shed 4 cents to $97.25 a barrel by 1210 GMT.
The dislocation between the two benchmarks was further
exacerbated this week by production snags from Norway to
Alaska.
They reinforced the view that a tightening of global oil
markets could benefit waterborne Brent crude over the U.S.
futures marker WTI, a grade delivered at the landlocked storage
hub of Cushing, Oklahoma.
Alaska's main oil pipeline moved closer to restoring oil
shipments to full volumes on Friday. The closure of the line due
to a leak last week choked crude flow to about half of normal
levels of 320,000 barrels per day on Thursday. []
"Supply concerns have played a key role in oil's ascent from
the $80 a barrel level but are showing signs of abating as of
late," Gain Capital Forex.com senior market strategist Daniel
Hwang said in a note late on Thursday.
The pipepline closure lent support to Brent crude prices
this week, lifting prices $1 shy off the $100 mark.
"The shutdown in the Trans Alaska Pipeline, a major
distributor to the West Coast, seems to be resolved and is
likely to allay fears of any long term supply disruptions,"
Hwang said.
(Additional reporting by Alejandro Barbajosa in Singapore;
editing by William Hardy)
