* U.S. monetary policy boosts sentiment
* Brent/U.S. crude differential widens
* Coming Up: U.S. weekly jobless claims 1330 GMT
(Updates throughout)
By Claire Milhench
LONDON, Jan 27 (Reuters) - Brent crude hovered under $98 on
Thursday, supported by the U.S. Federal Reserve's commitment to
maintain its economic stimulus package, although U.S. crude was
hit by a rise in inventories.
Fed policymakers on Wednesday voted unanimously to maintain
a $600 billion bond-buying plan to fuel the economic recovery,
boosting liquidity across the commodities complex and helping
Asian equities to one-week highs [].
The dollar <.DXY> slipped to 11-week lows against a basket
of currencies [], with the euro at two-month highs
versus the dollar.
"In this sort of environment, you look for growth assets. As
a result, equities and commodities are high up on the list,"
said Craig James, chief economist at CommSec in Sydney.
ICE Brent crude for March <LCOc1> dipped 25 cents to $97.66
a barrel at 0834 GMT, after rising over 2.5 percent on
Wednesday.
U.S. benchmark crude oil for March delivery <CLc1> slipped
66 cents to $86.67 a barrel at the same time, widening Brent
crude's premium <CL-LCO1=R> to U.S. crude to $10.99.
Investors and analysts attributed the differential to a
combination of high U.S. inventories and momentum chasing by
traders.
"It's partly fundamentals driven and partly market driven,
as the momentum chasers have been following Brent, but U.S.
crude inventories are also more extended," said Gavyn Davies,
chairman of Fulcrum Asset Management, a UK-based hedge fund
manager.
U.S. crude inventories rose more than expected in the week
to Jan. 21, according to the Energy Information Administration,
up 4.84 million barrels compared with a forecast of 1.2 million
barrels in a Reuters analyst poll [].
Stocks at the Cushing, Oklahoma terminal rose 862,000
barrels due to a fall in refinery utilisation and rising
imports. Cushing is the delivery point for the New York
Mercantile Exchange's benchmark West Texas Intermediate (WTI)
crude futures.
JP Morgan analysts said in a note that Brent tightness
reflected the ongoing decline in North Sea crude supplies, and
"the increased pull of Middle Eastern, Russian and West African
crudes by Asia".
SUPERCONTAGOS
They added that pipeline flows would have to be reconfigured
to ease high U.S. inventories, but the forward Brent-WTI spread
indicated that the market does not see a solution by 2012.
"Prompt WTI spreads have to remain wide for some time to
come, and supercontangos will remain a recurring feature on the
landscape," they said.
An executive at Valero Energy Corp <VLO.N> said West Texas
Intermediate had "almost become irrelevant" because of its deep
discount [].
Reuters technical analyst Wang Tao said on Jan. 25 that
Brent's premium to U.S. crude is on a firm uptrend and is
expected to reach $11.29 per barrel in two weeks, after a minor
drop to $8.00.
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For a graphic on the Brent-WTI technical analysis, click:
http://graphics.thomsonreuters.com/WT/20112501102706.jpg
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China's top 24 refineries are expected to process 170,000
barrels more crude oil per day this year than in 2010, or an
increase of 4 percent, due to planned heavy maintenance, a
Reuters survey found [].
The increase this year is less than a third of the
incremental level shown last year in a similar Reuters poll of
22 refineries.
(Additional reporting by Florence Tan in Singapore; Editing by
Jane Baird)
