UPDATE 6-US oil sinks as fears of Midwest crude squeeze ease
* Today marks 5 year anniversary of highest ever Brent futures price of $147.50
* Bernanke says Fed will keep accommodative policy for now
* Brent/WTI spread at lowest since November 2010
(Adds details, updates prices.)
NEW YORK, July 11 (Reuters) - U.S. crude oil futures fell the most in three weeks on Thursday, retreating from a 15-month high as traders took profits on a three-week rally that has upended price spreads and reshaped the forward market.
Fears of an intensifying squeeze on crude oil supplies at the Cushing, Oklahoma, delivery point have fuelled a powerful surge in U.S. crude versus Brent this month. That rally showed signs of breaking, with the Brent/WTI spread widening to nearly $3 after touching $1.32, the narrowest since late 2010.
The front-month spread settled at $2.82 per barrel.
News from the U.S. Midwest helped temper those fears, including the apparent closure of the Seaway pipeline that ships crude from Cushing to the Gulf Coast, as well as the closure of one of two small crude distillation units for a planned overhaul at BP's 405,000 barrel per day (bpd) Whiting, Indiana, refinery, which will reduce inland crude oil demand.
By late afternoon, after market settlement prices were in, flows on the Seaway pipeline had mostly resumed.
"The rally overextended itself and the market's been a little overdone for some profit taking," said Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut.
Those micro-fundamentals followed an earlier macro report by the International Energy Agency that said the North American shale oil boom could spur the biggest rise in non-OPEC supply growth in decades by 2014, eroding the market share of OPEC countries.
Front-month U.S. crude oil futures settled the day down $1.61 per barrel or 1.51 percent lower, at $104.91. The session high of $107.45 was the highest since March 2012.
The front-month contract jumped nearly 3 percent in the previous session, its biggest daily rise since early May. The contract has gained $15 a barrel since June 28.
Brent crude oil futures ended the day 78 cents lower at $107.73, after hitting $108.93, the loftiest since April 3.
Recent highs are still much lower than prices on the same date five years ago, when oil traded some $40 per barrel higher. In 2008, global benchmark Brent traded at a high of $147.50 and U.S. benchmark West Texas Intermediate traded at $147.27.
Thursday's price pull-back came one day after U.S. data showed the biggest two-week drop on record in crude stockpiles, while refinery production hit a five-year high.
The spread between U.S. gasoline futures and Brent crude oil futures <0#LCO-RB=R> widened to $19.31 a barrel, its widest since April 2. Brokers and traders said refineries were using the spread as a financial hedge should refining margins fall.
Initial claims for state unemployment benefits increased by 16,000 to a seasonally adjusted 360,000, the U.S. Labor Department said.
The market is still "backwardated" meaning prompt month prices are higher than those further out along the curve.
"The steep backwardation suggests supply scarcity, but that is hard to reconcile with the reported crude oil stock position," said Harry Tchilinguirian, head of commodity market strategy at BNP Paribas in London.
Prices were higher earlier in the session on a weaker U.S. dollar and after markets absorbed news from a speech by U.S. Federal Reserve Chairman Ben Bernanke, who said the central bank would continue to pursue an accommodative monetary policy.
(Additional reporting by Julia Payne in London and Luke Pachymuthu; Editing by David Gregorio and Chris Reese)