By Sara Sjolin and Michael Kitchen, MarketWatch
LONDON (MarketWatch) — Oil prices slipped below the $108 level on Friday, partly erasing solid gains seen in the prior day’s trade on the back of strong U.S. data.
Oil for August delivery CLQ3 +0.69% dropped 11 cents, or 0.1%, to trade at $107.95 a barrel, after leaping 1.5% in Thursday’s regular New York Mercantile Exchange action.
Likewise, September Brent crude UK:LCOU3 +0.39% fell 18 cents, or 0.2%, to $108.52 a barrel.
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Oil adds to its two-session rally, with both Nymex and Brent crudes higher.
The subtle moves came as the U.S. dollar was broadly unchanged, with the ICE dollar index DXY -0.13% trading around 82.77 from late Thursday’s 82.783 level. A weaker U.S. currency can discourage buying of dollar-denominated oil by making it more expensive to holders of other currencies.
Thursday’s rally came as jobless claims in the U.S. fell more than expected and Federal Reserve Bank of Philadelphia’s economic index this month rose to the highest level since March 2011.
Meanwhile, Thursday’s rally in the Nymex-traded West Texas Intermediate (WTI) crude well outpaced a 9-cent advance in its London-traded Brent North Sea crude rival, compressing the spread to less than $1.
The Nymex-Brent spread has been shrinking recently—at the start of the month, Brent was at a $5 premium to Nymex, while at this time in 2012, the Nymex-Brent spread was roughly $14.
Citi Futures strategist Timothy Evans said falling crude-oil supplies in the U.S. had helped Nymex WTI catch up to Brent.
“WTI is the flavor of the month, having easily eclipsed the performance of Brent crude oil in this year’s version of the ongoing popularity contest between the two major global benchmarks,” he wrote late Thursday.
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Evans said that with Nymex crude “in backwardation, the holding of inventories has become costly, and so we also think there’s a good chance that the decline [in U.S. crude stockpiles] will be steeper than usual.”
Backwardation means the futures are trading below the expected spot price, implying the futures will increase in value as they approach expiration.
Elsewhere in the energy complex, August gasoline RBQ3 +1.61% gained 1 cent, or 0.4%, to $3.12 a gallon in Friday trade after having closed flat in Thursday’s Nymex trade.
“It looks as though the poor recent price performance may have been enough to convince some traders that gasoline represents a relative bargain,” wrote Citi Futures’ Evans.
In other energy trade, August heating oil HOQ3 +0.59% added 1 cent, or 0.2%, to $3.11 a gallon, while August natural gas NGQ13 -0.74% slipped a penny, or 0.3%, to $3.80 per million British thermal units.
Sara Sjolin is a MarketWatch reporter based in London. Follow her on Twitter @sarasjolin.
Michael Kitchen is Asia editor for MarketWatch and is based in Los Angeles. You can follow him on Twitter at @KitchenNews.