US Oil Settles Near $105 as Data, Profit Taking Weigh

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U.S. crude oil futures dipped from a 15-month high on Thursday as investors sold contracts to take profit after three weeks of sharp gains and as U.S. data showed a rise in the number of Americans filing for unemployment benefits last week.

Brent's premium to U.S. crude narrowed to the smallest since November 2010 at $1.32, a day after U.S. data showed the biggest two-week drop on record in crude stockpiles, indicating strong U.S. demand for domestic crude oil.

The spread between U.S. gasoline futures and Brent crude oil futures widened to $19.30 a barrel, its widest since April 2. Brokers and traders said refineries were using the spread as a financial hedge should refining margins fall.

Brent shed about 80 cents to trade under $108 a barrel after settling at $108.51 on Wednesday, when it touched a three-month top of $108.69.

U.S. crude dropped by more than $2 intra-day, ending the session under $105 a barrel after peaking at $107.45 earlier — its 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.

"Today's jobless claims threw a wrench in the market," said Bill Baruch, senior market strategist at in Chicago, Illinois.

"The market's had a great run. You've seen a $15 gain in three weeks. Traders are taking profit. You don't want to be short over the weekend."

Initial claims for state unemployment benefits increased by 16,000 to a seasonally adjusted 360,000, the U.S. Labor Department said.

U.S. crude oil futures were also being pressured Thursday by a report that the 400,000-barrel-per-day Seaway crude oil pipeline was shut down.

Brent crude oil futures fell $1.08 to $107.43, after hitting $108.93, its loftiest level 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.

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.

Oil prices were somewhat pressured by a report 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.

Prices were higher earlier in the session on a weaker dollar and after markets absorbed news from a speech by Federal Reserve Chairman Ben Bernanke, who said the central bank would continue to pursue an accommodative monetary policy.