UPDATE 7-U.S. oil slides for 2nd straight day; Brent up, spread widens

Jeanine Prezioso
Wednesday, 30 Oct 2013 | 12:23 PM ET

* Libya exports in focus as down to 10 pct of capacity

* Higher-than-expected oil inventory build weighs on U.S. crude

* Investors await outcome of Fed meeting, statement at 2 p.m. EDT (1600 GMT)

NEW YORK, Oct 30 (Reuters) - U.S. oil extended its move lower on Wednesday after government data showed large inventory builds further pressuring domestic oil's discount to international benchmark Brent.

Disruptions to Libyan oil exports have cut supplies to Europe and Asia while supporting Brent prices.

The divergent courses of the North American and international oil markets boosted Brent's premium over the U.S. benchmark to more than $12 a barrel.

The U.S. Energy Information Administration reported a sharp 4.1 million barrel rise in crude stocks in the United States. Supplies at the Cushing, Oklahoma, U.S. oil storage hub rose by 2.2 million barrels, their third straight weekly rise.

Brent crude for December delivery was trading up 45 cents at $109.57 a barrel by 12:07 p.m. EDT (1607 GMT), after falling 60 cents on Tuesday. It touched an intraday high of $109.65 on Wednesday.

U.S. crude was 85 cents lower at $97.35, having hit an intraday low of $96.86.

The discount of West Texas Intermediate (WTI) - the U.S. oil grade that underpins the benchmark oil futures contract - to Brent expanded to $12.16 a barrel just after inventory data were released. The spread earlier stretched to $12.34 - its widest in a week - putting it on track for its widest settlement since early April.

Analysts are calling for the spread to narrow as refineries emerge from maintenance season, which has slowed demand for crude.

"The widening spread will encourage refiners to return to production and eventually narrow the spread," said Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis.


While U.S. oil prices sank, Brent prices were supported by weekend reports of a sharp drop in Libya's crude oil exports, as protests have halted operations at ports and fields.

Italian energy major Eni, the biggest foreign producer in Africa, cut its production outlook for 2014 due to supply cuts in Libya and Nigeria.

Traders were also looking ahead to comments expected at 2 p.m. EDT from the U.S. Federal Reserve after its two-day policy meeting. A mixed bag of U.S. economic data over the last few days has reinforced expectations the Fed will not reduce its $85 billion of monthly asset purchases until March at the earliest, which would underpin oil prices.

Investors will also keep an eye on a series of technical and diplomatic meetings on Iran's nuclear program, which could pave the way for an easing of sanctions on Iranian oil exports.

Any increase in Iranian oil exports may take some time, however, while the U.S. Senate is debating fresh sanctions aimed at further curbs of the country's oil sales, an influential senator said.