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U.S. cash crude mixed as arbitrage seesaws, then narrows

Fri, 19th Jul 2013 21:26

* Crude futures end mixed, Brent slips and U.S. near flat * Brent-U.S. crude spread narrows, U.S. at premium intraday NEW YORK, July 19 (Reuters) - U.S. cash crude differentialswere mixed on Friday as the transatlantic spread narrowed andahead of the U.S. August crude contract's expiration on Monday,traders and brokers said. Brent crude's premium to U.S. crude ended at 20cents a barrel based on September contract settlements, afterending on Thursday at 89 cents a barrel. But during the session U.S. crude had a 5 cent premium toBrent, the first since 2010. Brent's premium during Friday'strading was as much as $1.16. Brent's August contract expired on Tuesday and the spreadended at $3.40 a barrel based on August contract settlements. Usually, the wider the arbitrage, the more supportive it isfor U.S. cash crude differentials, while a narrower spread oftenpressures differentials. This especially holds true for sweetgrades, which are priced in line with global waterborne crudessuch as Brent. SWEET GRADES Light Louisiana sweet crude oil for August deliverytraded from $5.90 to $6.60 over the benchmark U.S. crude futures. That range was little changed from Thursday's tradescompleted from $5.85 to $6.50 over the benchmark. Sweet crude, especially LLS, has been supported because of alack of foreign sweet on the U.S. Gulf Coast and recent highcapacity use by refiners, according to brokers and analysts. While pipeline access to bring crude, especially sweetgrades, from West Texas direct to the Texas Gulf Coast hasincreased, the ability to move those barrels to Louisianaremains constrained, traders said. The same goes for sweet barrels from the Bakken shaleproduction further north, traders and brokers said, helping keepLLS differentials strengthened even as the Brent-U.S. crudespread has narrowed. Bakken crude at the Clearbrook, Minnesota, hub hadbids at $4.00 under the futures benchmark, with no trades seen,after it traded on Thursday at $3.00 under the benchmark. SOUR GRADES Mars sour crude, a Gulf of Mexico-produced grade,traded at $1.00, $1.05 and $1.10 over the futures benchmark,stronger after Thursday's trades from 10 cents under to 50 centsover the benchmark. Mars traded on Wednesday from 30 cents under to 15 centsover the benchmark, stronger after Tuesday's trades at 60 to 85cents under the futures benchmark. Mars differentials had been under pressure from late inJune, after Royal Dutch Shell Plc said on June 28Friday it would be shutting the portion of its Houma-to-Houstoncrude oil pipeline that runs from Louisiana to Texas in Augustto finish reversing the line in order to move crude from Texasto Louisiana markets. The planned reversal of the pipeline, which had allowed Gulfof Mexico crude produced offshore Louisiana to get to Texasrefineries, will provide Louisiana markets with pipeline accessto the recent booming production from inland U.S. crude grades. But work on the reversal will restrict access to markets forMars and other crude grades produced in Louisiana or justoffshore in the Gulf of Mexico. Mars barrels for August delivery traded at $1.60 to $1.70over the benchmark the last two trading days of June, and amonth prior Mars barrels for July deliver were trading at almost$4 a barrel over the benchmark. On Wednesday, Mars and other Gulf of Mexico sour gradesstrengthened on news that Shell was shutting down its offshoreAuger production platform for work. Crude from the Auger platform feeds the Bonito sour stream. MIDLAND GRADES West Texas Intermediate crude at Midland traded at 35and 40 cents under the futures benchmark on Friday, aftertrading on Thursday at 30 and 35 cents under the benchmark. West Texas Sour crude, also at Midland, traded at 30and 35 cents under the benchmark, after Thursday's trade at 30cents under the benchmark. CRUDE FUTURES Brent September crude fell only 63 cents to settleat $108.07 a barrel. The Brent August crude contract on Tuesdayexpired and went off the board at $109.40 a barrel. U.S. August crude edged up 1 cent to settle at$108.05 a barrel. U.S. September crude rose 6 cents to settle at$107.87 a barrel. (Reporting by Robert Gibbons)

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