WTI Drops to Seven-Week Low; U.S. Supplies Seen Rising

Oil fell to a seven-week low in New York amid estimates that U.S. crude inventories rose. Futures slid with stocks and the euro as Italy’s inconclusive elections spurred concern that Europe’s debt crisis may worsen.

West Texas Intermediate declined as much as 1.3 percent to $91.92 a barrel, the lowest intraday price since Jan. 4. U.S. crude supplies probably climbed to the highest in seven months, a Bloomberg News survey showed before Energy Department data tomorrow. The U.S. and its partners urged Iran to accept an updated offer at talks on the country’s nuclear program today. Early results suggested Italy’s election would lead to a hung parliament and another vote.

“Regardless of the election results in Italy, core Europe is in recession,” said Guy Wolf, a strategist at London-based commodities broker Marex Spectron Group Ltd., who predicts that the European benchmark, Brent, will trade in a range of $100 to $125 a barrel next month. “Markets are capped at the top end by the demand destruction they cause, yet supported by reasonable fundamentals.”

WTI for April delivery was down 65 cents, or 0.7 percent, at $92.46 a barrel in electronic trading on the New York Mercantile Exchange at 1:01 p.m. London time. The volume of all futures traded was 18 percent lower than the 100-day average.

Brent for April settlement on the London-based ICE Futures Europe exchange decreased as much as $1.44, or 1.3 percent, to $113 a barrel, the lowest since Jan. 28. The volume was 10 percent higher than the 100-day average. The North Sea crude was at a premium of $20.91 to WTI contracts, compared with $21.33 yesterday.

Fuel Supplies

U.S. crude inventories probably rose 2.5 million barrels last week to 378.9 million, the highest level since July 20, according to the median estimate of eight analysts surveyed by Bloomberg. That would be a sixth weekly gain, the longest rising streak since May. Gasoline supplies fell 1 million barrels while distillate fuels, including heating oil and diesel, dropped by 1.55 million, the survey showed.

The industry-funded American Petroleum Institute is scheduled to release separate inventory data today. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA, the Energy Department’s statistics unit, for its weekly survey.

Iran Talks

WTI is accelerating losses as a measure of technical momentum declines. The moving-average convergence divergence indicator yesterday fell below zero for the first time since Dec. 19, according to data compiled by Bloomberg. The drop may extend to the 100-day moving average, around $90.80 today. Buy orders tend to be clustered near chart-support levels.

The U.S. and its partners are offering to ease banking, petrochemical and gold sanctions if Iran agrees to cease its output of 20 percent enriched uranium, according to two officials close to negotiations that started today in Almaty, Kazakhstan.

Iranian officials, who spoke on condition of anonymity because they weren’t authorized to comment publicly, said they had returned to talks in a listening mode. They stipulated that Iran will reject any offer that doesn’t recognize its right, as a signatory to the nuclear Non-Proliferation Treaty, to enrich uranium for peaceful civilian use.

Italy Elections

In Italy’s election, Democratic Party leader Pier Luigi Bersani, having campaigned to maintain budget rigor, won control of the lower house but not the Senate, and rival Silvio Berlusconi called for a recount. Berlusconi, who served previously as premier, won a blocking minority in the Senate, and former comedian Beppe Grillo’s party secured 25 percent support in its first national contest. Both men campaigned to reverse austerity measures taken by incumbent Premier Mario Monti.

“The markets were somewhat over-bought and needed a break,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “But the underlying positive economic recovery tenor is still supporting, and we are likely to recover after this breather.”

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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