* Correlation between Brent, U.S. crude breaks down in
Asia trade
* U.S. crude set to fall back towards $88-technicals
[]
* Coming Up: U.S. non-farm payrolls for December; 1330 GMT
By Alejandro Barbajosa
SINGAPORE, Jan 7 (Reuters) - Brent crude fell 0.7 percent
on Friday to below $94 as a stronger dollar curbed the appeal
of commodities for investors, while U.S. crude rebounded as
traders unwound short positions after a fire shut down a
Canadian oil sands facility.
Brent crude for February <LCOc1> fell 64 cents to $93.88
at 0422 GMT, about $5 higher than U.S. crude benchmark West
Texas Intermediate <CLc1>, which gained 43 cents to $88.81,
still on track for a 3 percent weekly drop.
"It seems to me that WTI was oversold compared to Brent
and that is why it is correcting," said Tony Nunan, a risk
manager with Tokyo-based Mitsubishi Corp.
"They may have bought Brent expecting the spread to widen
as it did and now they are taking profit. With the back of
both the Brent and WTI curves down, it's an anomaly at the
front of the WTI curve."
A jump last week in crude stored at the Cushing, Oklahoma
hub, the delivery point for U.S. crude benchmark West Texas
Intermediate (WTI), caused WTI to trade at a discount as wide
as $6.55 a barrel on Thursday.
"We doubt that such a large spread will be sustainable,"
Credit Suisse analysts including Stefan Graber said. "With the
end of the winter season in February-March, energy prices may
face further downward pressure."
The rebound in U.S. crude broke the correlation between
the two main futures benchmarks at least temporarily.
A fire broke out on Thursday at Canadian Natural Resources
Ltd's Horizon Oil Sands facility in northern Alberta,
forcing a production shutdown. The Cushing hub mostly
receives crude produced from Canadian oil sands. []
"Someone is unwinding a WTI/Brent position in Asian time,"
said Ken Hasegawa, a commodity derivatives manager at Japan's
Newedge brokerage.
"In the last two days, the spread had widened a dollar per
day. It's possible that there is someone who has to cut losses
this morning."
U.S. crude prices have had a turbulent first week of the
year, seesawing in a range of almost $5 after touching a
27-month high of $92.58 a barrel on Monday. Front-month
February crude was up 50 cents at $88.88 at 0300 GMT, having
touched $87.85 on Thursday, the lowest intraday price since
Dec. 20.
Strength in price, trading volumes and market structure of
Brent crude has helped to lure some of the big investment
money that has typically favoured U.S. oil futures.
[]
Thursday's Brent premium to U.S. crude was the widest
level since it hit $6.57 on May 13, 2010. If the premium
pierces that seven-month high, it would be the widest since
Feb. 12, 2009, when it rose above $10 on an intraday basis.
Brent's strength has been spurred by continued strong
Asian demand and robust European product markets, while U.S.
crude has been pressured by an extended build in stockpiles at
Cushing, despite a drop in national stocks over the last five
weeks.
The oil market's attention was also on Friday's U.S.
monthly payroll report. Revised forecasts in a Reuters poll
showed expectations that December U.S. nonfarm payrolls jumped
175,000 after November's small gain of just 39,000.
[]
Thursday saw further pressure on oil from gains in the
dollar against the euro, which weighed on dollar-denominated
commodities. Recent U.S. data has painted a rosier economic
picture in contrast to worries about the euro zone's sovereign
debt crisis. []
Japan's Nikkei average dipped 0.2 percent on Friday after
U.S. stocks slipped with soft retail sales and a sharp rise in
the dollar leaving investors edgy before December's U.S.
employment report.
(Editing by Michael Urquhart)
