WTI Oil Advances a Second Day as Brent Premium Shrinks

(Corrects timing of Seaway expansion in seventh paragraph.)

West Texas Intermediate oil rose for a second day, heading for a second weekly advance. Brent crude’s premium to the U.S. benchmark grade is poised for the biggest weekly drop in five months.

WTI futures climbed as much as 0.3 percent in New York after gaining 0.6 percent yesterday, the most in a week. OPEC will increase daily crude exports by 300,000 barrels to 23.75 million in the four weeks to March 30 as refineries in Europe and the U.S. resume after maintenance and boost demand, according to Oil Movements, a tanker tracker. Brent oil is poised for a weekly decline.

“In the U.S., we’re exiting the refinery turnaround period and heading into the summer demand season,” said Anthony Nunan, a senior adviser for risk management at Mitsubishi Corp. (8058) in Tokyo. “With the glut in the U.S. Midcontinent being gradually relieved because of pipeline capacity build out, it looks like WTI is going to stabilize and maybe come up. WTI is much more constructive, whereas Brent really looks like it’s on a downtrend.”

West Texas oil for April delivery rose as much as 32 cents to $93.35 a barrel in electronic trading on the New York Mercantile Exchange and was at $93.28 at 11:35 a.m. Singapore time. The volume of all futures traded was in line with the 100- day average. The contract advanced 51 cents yesterday to $93.03, the highest since Feb. 25. Prices are up 1.4 percent this week.

Brent-WTI Spread

Brent for May delivery climbed 52 cents, or 0.5 percent, to $109.48 a barrel on the London-based ICE Futures Europe exchange. The April contract expired yesterday at $109.42. Brent has dropped 1.2 percent this week, narrowing its premium to WTI by $3.06 a barrel, the most since Oct. 19. The spread was at $15.84 today, near the narrowest since January.

The differential will average about $16 a barrel this year and narrow to $9 in 2014 as new pipeline capacity lowers the cost of moving crude to Gulf Coast refiners from the central U.S., the Energy Information Administration, the Energy Department’s statistical arm, said in a monthly report March 13. The spread will average $7.50 during the second quarter of this year, Goldman Sachs Group Inc. said in a March 11 report.

A doubling of the capacity on the Seaway pipeline to the Gulf Coast may help clear a glut at Cushing, Oklahoma, the delivery point for the Nymex WTI contract. The boost to 850,000 barrels a day will be completed in the first quarter of 2014, according to slides published by Enterprise Products Partners LP (EPD), co-owner of Seaway, at a Feb. 28 Simmons Energy Conference presentation.

Technical Resistance

Inventories at Cushing fell by 1.5 million barrels last week, according to the EIA. That’s the biggest drop since May 2011, reducing stocks at the largest U.S. oil storage hub to the lowest in 11 weeks.

Brent crude in London has technical resistance along its 200-day moving average, about $109.47 a barrel today, according to data compiled by Bloomberg. Futures this week fell below the indicator, signaling a breach of long-term chart support, and yesterday failed to settle above it. Sell orders tend to be clustered near technical-resistance levels.

Oil output by the Organization of Petroleum Exporting Countries may rise by 850,000 barrels a day from April to June, signaling a gain in prices as spare production capacity is reduced, Morgan Stanley said in a report yesterday. The group, which provides about 40 percent of global production, will pump more as refineries end maintenance and utilities in Saudi Arabia and Japan increase the use of crude and fuel oil for electricity generation, the bank said.

WTI may fall next week after rising domestic production boosted U.S. crude inventories to the highest level in eight months, a Bloomberg survey showed. Thirteen of 29 analysts and traders, or 45 percent, forecast prices will drop through March 22. Ten respondents, or 34 percent, predicted a gain. Six said there would be little change.

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ramsey Al-Rikabi in Singapore at ralrikabi@bloomberg.net

To contact the editor responsible for this story: Paul Gordon at pgordon6@bloomberg.net

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