UPDATE 9-Brent dips, U.S. crude rises on pipeline, budget deal optimism
* Optimism on U.S. budget talks lifts equities, supports oil
* Coming up: API oil data 4:30 p.m. EST Tuesday
NEW YORK, Dec 17 (Reuters) - Brent crude prices dipped on Monday while U.S. oil futures rose as news of a key U.S. pipeline expansion will be completed next month and optimism about a deal to avoid the "fiscal cliff" prompted spread trading between the two contracts. The discount of U.S. crude to the international Brent benchmark narrowed by more than 80 cents following news Enterprise Products Partners LP and partner Enbridge Inc would complete a 350,000 barrel per day (bpd) expansion to the 150,000 bpd Oklahoma to Texas Seaway pipeline in early January. The increased capacity will allow more crude to the Gulf Coast from the Cushing, Oklahoma delivery point for the U.S. oil futures contract, where a glut of oil from rising Canadian and U.S. flows has depressed domestic prices relative to coastal and international prices. Further support for U.S. crude came after President Barack Obama and Republican House Speaker John Boehner met for talks to resolve the U.S. budget crisis. Equities markets also rose on the optimism around the discussions, which have held sway over oil markets for weeks amid trader concern failure to reach a deal could cause a recession and damp fuel demand. "Hopes for a budget deal have the equities market putting in a good day and U.S. crude has followed along," said Addison Armstrong at Tradition Energy in Stamford Connecticut, adding the "outlook for pretty weak economies in Europe have helped limit Brent." Brent crude futures fell 32 cents to $107.86 a barrel at 1:58 p.m. EST (1858 GMT), having swung from $107.72 to $108.50. Brent hit a 2012 high of $128 in March and is on course to end the year little changed in percentage terms as economic worries have countered price-supporting supply disruptions in the Middle East and other regions such as the North Sea. The front-month U.S. January crude rose 62 cents to $87.35 a barrel, with prices finding some resistance after briefly topping the 50-day moving average at $87.66 a barrel. Tempering enthusiasm about the U.S. economy, the New York Federal Reserve said in a report released on Monday that manufacturing in New York State declined for a fifth straight month in December and the labor market remained weak.
U.S. gasoline futures edged up slightly on news Motiva Enterprises suspended the restart of its 325,000 barrel-per-day crude unit at the Port Arthur, Texas, refinery after a small fire on Monday. Sources familiar with the plant said the unit was not being shut down, as it was after a small fire last week, but that the process of gradually increasing production rates had been paused.