Brent edges over $111, U.S. jobs in focus

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By Jacob Gronholt-Pedersen

SINGAPORE (Reuters) - Brent futures edged over $111 a barrel on Friday after a two-day drop, as severe weather cut oil output in Europe and the United States, with traders waiting for a key U.S. jobs report later in the day.

Aiding Brent's rise was data on Thursday that showed the U.S. economy grew faster than initially estimated in the third quarter, suggesting oil demand could improve in the world's top consumer.

The gains, though, were curbed by speculation that positive economic data would prompt the U.S. Federal Reserve to start unwinding its bond-buying programme, which could reduce support for riskier assets such as oil and other commodities.

"GDP numbers were strong, so that makes us more comfortable about a recovery in the U.S. economy," said Tony Nunan, oil risk manager at Mitsubishi Corp in Tokyo.

"But once tapering starts, that's probably time for people to take profits and get out of risk assets, including oil."

Brent crude for January delivery was up 29 cents at $111.27 a barrel at 0731 GMT, after falling 1.5 percent in the previous two sessions. Still, the benchmark was on course for a 1.3 percent weekly gain, its third in four.

U.S. crude was up 6 cents at $97.44 a barrel, after rising 18 cents on Thursday and touching a five-week high just shy of $98 a barrel.

The contract, buoyed by a drop in U.S. crude stockpiles after a 10-week increase, has gained 5 percent so far this week and is on track for its best weekly showing in five months.

MAJOR STORM

Oil prices on both sides of the Atlantic could be supported by severe weather in parts of Europe and the United States.

North Sea oil producers have cut output and moved staff from some platforms as a major storm blasted towards mainland Europe in what meteorologists warned could be the worst storm to hit the continent in years.

Cold weather has also dented some oil and gas production in the United States and could further crimp output in top crude-producing states like Texas and North Dakota.

The U.S. Commerce Department on Thursday revised third-quarter GDP growth sharply upwards. Weak demand and a pile-up in business inventories, however, buoyed the case for the Fed to keep buying bonds for now.

The focus will now be on U.S. nonfarm payrolls for November due at 1330 GMT for further signs of economic growth.

Transcanada Corp told shippers on Thursday that its 700,000-barrels-per-day pipeline from Cushing, Oklahoma, to Port Arthur, Texas, will be in service by mid-January.

The company said earlier this week it expected the line to be in service on January 3, buoying U.S. oil prices. Oil traders have been awaiting details on the pipeline's start date as it will help relieve a supply glut at the Cushing hub, the delivery point for oil priced on WTI futures.

The rally in WTI over the past week caused Brent's premium to the U.S. benchmark to narrow by almost $5 to $13.89 per barrel, after the spread last week reached its highest since March.

"Brent crude prices edged lower (Wednesday and Thursday) as investors squared their long positions in Brent crude following the narrowing of the WTI-Brent spread," analysts at Phillip Futures said in a note to clients.

(Editing by Tom Hogue and Muralikumar Anantharaman)