NEW YORK: Brent crude rose to a fresh nine-month high and hit a record in euro terms on Thursday, creating a new headache for cash-strapped Europe on heightened tensions between Iran and the West.
On a euro basis, Brent futures hit a record 93.60 euros per barrel in early trade, exceeding the previous peak of 93.46 hit on July 3, 2008, prompting concern that high oil prices would hit the shaky economic recovery and further dent demand.
US crude rose more, as investors sold off a key spread -- the premium of international benchmark Brent to US futures -- after a government report showed a drop in inventories at the Cushing, Oklahoma, delivery point for the New York Mercantile Exchange's contract.
Rising inventories in the US Midwest have depressed the value for US futures, widening Brent's premium to US crude to over $20 a barrel earlier in the month. The spread narrowed 40 cents on Thursday, trading at $16.20 a barrel in early afternoon activity in New York.
Goldman Sachs said in a research note it expected the spread to narrow to $5 a barrel over the next six months, as the reversal of the Seaway pipeline in the Midwest sends more crude from the region to the Gulf Coast refining hub.
Brent's premium against US crude narrowed to about $16.05, after closing at $16.62 on Wednesday.
The bank also recommended taking profits on July 2012 Brent long positions and opening September 2012 long positions for US crude oil futures.
By 12:42 p.m. EST (1742 GMT), Brent crude for April delivery rose 16 cents to $123.06 a barrel, off the session high of $124.50, the highest for front-month Brent since May 3 last year.
US April crude traded up 72 cents at $107 a barrel, after having climbed to a session high of $107.09, the highest for front-month NYMEX crude since May 5 last year.
US crude oil inventories rose 1.63 million barrels last week, more than expected, but s tockpiles at the Cushing, Oklahoma, hub dropped 315,000 even though overall US crude inventories rose 1.63 million barrels last week, more than expected, according to data from the US Energy Information Administration.
"The draw in Cushing caused a selling of the Brent-WTI spread, which had strengthened previously after stocks there rose in recent weeks," said Hamza Khan, analyst at the Schork Group in Villanova, Pennsylvania.
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