Brent Drops for Second Day Amid Rising U.S. Crude Supply

Brent futures dropped for a second day after industry data showed U.S. crude inventories climbed for a second week.

Futures dropped as much as 0.8 percent after declining 1 percent yesterday. U.S. crude supplies increased 680,000 barrels last week, the American Petroleum Institute said. An Energy Information Administration report today may show stockpiles gained 2 million barrels, rising from the most in more than 82 years, according to a Bloomberg News survey. The EIA cut its forecasts for West Texas Intermediate and Brent on increasing output and lower global consumption. Bank of America Corp. said WTI will drop to average $90 a barrel this year.

“The oil futures market has a stand-by approach ahead of the weekly EIA report, and we are seeing some profit-taking,” Myrto Sokou, an analyst at Sucden Financial Ltd. in London, said by phone.

Brent for June settlement fell as much as 87 cents to $103.53 a barrel and was at $103.87 as of 1:23 p.m. local time on the London-based ICE Futures Europe exchange. The European benchmark grade was at a premium of $8.12 to WTI compared with $8.78 yesterday. The spread was $8.58 on May 3, the narrowest based on closing prices since December 2011.

WTI for June delivery was at $95.75 a barrel, up 13 cents, in electronic trading on the New York Mercantile Exchange. The volume of all contracts traded was 0.1% percent above the 100- day average.

Forecasts

WTI will average $93.17 a barrel this year, down 75 cents from the April projection of $93.92, the EIA, the Energy Department’s statistical arm, said yesterday in its monthly Short-Term Energy Outlook. Brent will average $105.89 in 2013, down $2.07 from last month’s prediction.

Oil production outside the Organization of Petroleum Exporting Countries will rise 2.1 percent to 53.85 million barrels a day in 2013, led by gains in the U.S. and Canada, according to the EIA. The forecast increased by 80,000 barrels from April’s report. U.S. output will climb 14 percent to 7.42 million barrels a day, the department said.

OPEC will produce 35.88 million barrels a day this year, the EIA said. Last month’s forecast was 35.98 million. OPEC’s 12 members pump about 40 percent of the world’s crude.

The EIA lowered its 2013 outlook for global oil consumption to 89.93 million barrels a day from 90 million estimated last month.

Many Barrels

Bank of America said in a report dated yesterday that the Brent-WTI spread could widen again unless rules against exporting U.S. crudes are removed.

“There are way too many barrels in commercial and strategic storage in the U.S., and the ability of refiners to keep displacing foreign crudes seems limited going forward,” the bank said.

U.S. gasoline inventories fell by 186,000 barrels last week, the API data showed. Supplies are projected to decline by 475,000 barrels in the EIA report, according to the median estimate of 12 analysts surveyed by Bloomberg.

Distillate-fuel stockpiles, including heating oil and diesel, rose 1.1 million barrels, according to the API. The EIA will report a gain of 500,000 barrels, the survey shows.

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 for its weekly survey.

“The outlook is going to remain muted for the U.S. for consumption of oil,” said David Lennox, an analyst at Fat Prophets in Sydney. “There is also U.S. domestic supply, which continues to grow.”

China’s net crude imports rose to the highest level in three months in April, data from the General Administration of Customs in Beijing showed today. Deliveries climbed to 5.62 million barrels a day, from 5.39 million a day in March. China is the world’s second-biggest oil consumer, accounting for 11 percent of the world’s demand in 2011, according to BP Plc (BP/)’s Statistical Review of World Energy.

To contact the reporter on this story: Konstantin Rozhnov in London at krozhnov@bloomberg.net

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.