* February Brent hits 27-month high above $99 a barrel
* Brent premium to U.S. crude at 23-month highs of $8
* China's hikes lender reserve rates requirement
* Coming Up: February Brent crude expiration on Friday
(Recasts, updates prices and market activity)
By Robert Gibbons
NEW YORK, Jan 14 (Reuters) - Brent crude oil rose to a
27-month peak above $99 a barrel on Friday, closing in on $100
ahead of the February contract's expiration and shrugging off
China's move to lift lenders' reserve requirements that had
weighed on U.S. oil prices.
ICE Brent futures have traded above U.S. crude since August
last year, supported by a combination of dwindling North Sea
crude supplies and disruption of oil grades priced off it,
traders said. []
The strength of U.S. equities and Brent helped U.S. crude
turn briefly positive after being pressured by China's move to
lift lenders' reserve rate requirements by 50 basis points in
its ongoing effort to tame inflation.
In London, ICE Brent crude for February <LCOc1> rose 59
cents, or 0.6 percent, to $98.65 a barrel, at 2:07 p.m. EST
(1907 GMT), having traded as high as $99.20, the highest since
Brent reached $100.31 in October 2008. The February contract
expires at the end of Friday's trading.
U.S. crude oil for February delivery <CLc1> rose 4 cents,
or 0.04 percent, to $90.44 a barrel, in choppy trading having
bounced off its earlier $90.10 low.
The expiration of February crude options on Friday added to
the price volatility.
"Equities and oil seem a bit toppy, and U.S. crude hasn't
been able to push to far above $92, but if you get a $100 Brent
print then U.S. crude should take off," said Richard Ilczyszyn,
senior market strategist at Lind-Waldock in Chicago.
"With gasoline prices this high you may start to see some
demand drop and the bigger story may be the China reserve rate
hike and its impact on commodities."
Stronger-than-expected earnings from JPMorgan Chase & Co
lifted the stock market, offsetting lukewarm economic data and
putting the S&P 500 on track for its seventh straight week of
gains. []
Early on Friday, crude prices had a muted reaction to
several U.S. economic reports. But rising gasoline prices
pushed down U.S. consumer sentiment in early January,
overshadowing an improved job outlook and passage of temporary
federal tax breaks, a Thomson Reuters and the University of
Michigan survey released on Friday showed. []
December U.S. retail sales rose slightly less than
expected, but total 2010 sales reversed two years of
contraction with the biggest gain in more than a decade.
[]
Reaction to an increase in the Consumer Price Index and
rising industrial output led by utility output boosted by cold
weather was tempered by the China reserve requirement hike.
China's recent tightening policy has prompted worries that
Beijing's appetite for buying oil and other commodities could
decrease. [] []
That was China's seventh increase since early 2010,
prompting concern that its appetite for buying oil and other
commodities could be curbed.
The euro <EUR=> and dollar index <.DXY> seesawed. []
BRENT/U.S. CRUDE SPREAD WIDENS
The discount for U.S. crude futures' benchmark West Texas
Intermediate (WTI) against Brent <CL-LCO1=R> reached fresh
23-month highs over $8 a barrel, the widest discount since
February 2009. []
The expiry of the February Brent futures contract on Friday
had analysts expecting it to erode some of the strong
differential, as February had been trading at a premium to
March. But the March Brent <LCOH1> contract's gains were
outpacing the February contract on Friday.
Total Brent trading volume was above 449,000 lots, above
the 250-day average of 381,046 lots, according to Reuters data.
Volume was 654,821 on Thursday. Total U.S. crude volume stood
at more than 726,000 lots traded, above the 250-day average of
679,000 lots.
(Additional reporting by Zaida Espana in London and Alejandro
Barbajosa in Singapore; Editing by Alden Bentley))
