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Brent at Nine-Month High on China; Goldman Sees Tight Supply

Feb. 8 (Bloomberg) -- Brent crude, headed for a fourth weekly advance, climbed to a nine-month high in London after stronger-than-expected trade data from China, the world’s second-biggest user.

Futures rose to more than $118 a barrel for the first time since May 3, boosting the premium to West Texas Intermediate for an eighth day to the most in almost two months. China’s exports climbed 25 percent in January from a year earlier and crude imports increased to the highest level in eight months, customs figures showed. Oil markets will “remain tight” in the first quarter and may push prices above its forecasts, Goldman Sachs Group Inc. said.

“The numbers out of China are good,” said Nic Brown, head of commodity research at Natixis SA in London, who forecasts that Brent will average $107.40 this year. “China appears to be significantly stronger than even we were expecting. This is a clear upside risk for oil prices.”

Brent for March settlement advanced as much as $1.17, or 1 percent, to $118.41 a barrel on the London-based ICE Futures Europe exchange and was at $118.23 at 1:29 p.m. local time. Volumes were 29 percent more than the 100-day average. The European benchmark grade’s premium to WTI futures widened to as much as $22.28, the most since Dec. 14.

Crude for March delivery on the New York Mercantile Exchange added 9 cents to $95.92 a barrel in electronic trading. The volume of all futures traded was 64 percent higher than the 100-day average. Prices are down 1.9 percent this week, after advancing 14 percent over the prior eight weeks.

China Trade

The Brent-WTI spread has widened since Enterprise Product Partners LP said Jan. 31 that capacity will be limited until late 2013 on its Seaway pipeline to the Gulf Coast from Cushing, Oklahoma, the delivery point for New York crude.

Brent’s advance to more than $117 a barrel has been driven by improving fundamentals rather than increasing risk premium, Stefan Wieler, an analyst with Goldman Sachs in New York, said in a report dated yesterday.

Prices may exceed the bank’s forecasts, which for Brent futures are at $110 a barrel over the next three-to-six months, and at $105 in 12 months. For WTI, Goldman projects a level of $102.50 in three months, $105 in six and $97 in 12 months.

China bought 24.87 million metric tons of crude more than it exported last month, according to data published today on the website of the Beijing-based General Administration of Customs. That’s equivalent to 5.88 million barrels a day, the most since May, data compiled by Bloomberg show.

Mideast Supplies

Brent, the benchmark price for more than half the world’s oil, extended gains yesterday amid signs of increased tension in the Middle East and reduced supplies by Saudi Arabia.

Iran won’t be coerced into holding direct negotiations with the U.S. about its nuclear program while being threatened and simultaneously squeezed by Western sanctions, Supreme Leader Ayatollah Ali Khamenei said yesterday. The U.S., which imposed new financial restrictions on Iran on Feb. 6, is ready for direct talks as soon as Khamenei gives a commitment to negotiate, Vice President Joe Biden said at the Munich Security Conference Feb. 2.

Exxon Mobil Corp. said crude shipments from Nigeria are still being disrupted because of repairs on a pipeline facility.

The export terminal for Qua Iboe, the country’s benchmark and biggest grade, is operating as normal, Nigel Cookey-Gam, a Lagos-based spokesman, said today in an e-mail.

European Diesel

WTI may fall next week as technical indicators signal that prices may have risen too quickly to be sustainable and as equities come under downward pressure, a Bloomberg survey showed. Eighteen of 37 analysts and traders, or 49 percent, forecast crude will decline through Feb. 15. Twelve respondents, or 32 percent, predicted an increase and seven forecast little change. Last week, 42 percent projected a gain.

The relative-strength index of front-month oil futures rose above 74 at settlement on Jan. 30, the highest level since Feb. 24, 2012. The RSI was at 58 today.

Weakening demand and surging U.S. exports are hurting Mediterranean producers of diesel, just as they boost capacity at the fastest rate in five years. Ultra low-sulfur diesel’s premium to gasoil on the ICE Futures Europe sank to $3 a ton on Feb. 5, the smallest gap since November 2009, and was at $4.50 yesterday, according to data compiled by Bloomberg. It averaged $26.44 last year.

Total SA and Hellenic Petroleum SA were among companies from Portugal to Greece that added about 130,000 barrels a day of so-called hydrocracking units last year, which increased Europe’s output of the fuel by about 9 percent. Capacity is growing just as the second European recession in four years reduces consumption.

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