WTI Advances to 14-Month High Slimming Brent Gap to $3

West Texas Intermediate jumped to its highest level in 14 months amid declining crude stockpiles in the U.S., narrowing its discount against Brent to less than $3 a barrel for the first time since 2010.

Futures climbed above $105 a barrel for the first time since May 3, 2012. Crude inventories fell by 9 million barrels last week, said a person with knowledge of data from the industry-funded American Petroleum Institute. A government report later today may show that supplies dropped by 3.2 million barrels, according to a Bloomberg News survey. OPEC forecast lower demand for its crude in 2014.

“That was the second straight week of huge draws in U.S. crude inventories,” said Amrita Sen, an analyst at Energy Aspects in London. “Continued large inventory draws in the U.S. are fueling further optimism about the U.S. economy and reflect that production there is starting to flat-line.”

WTI for August delivery rose as much as $1.80 to $105.33 a barrel in electronic trading on the New York Mercantile Exchange and was at $105.08 at 1:17 p.m. London time. The volume of all futures traded was 87 percent higher than the 100-day average.

The U.S. benchmark pared its discount against its European counterpart, North Sea Brent, to less than $3 a barrel for the first time since December 2010, underlining the progressive easing of a supply bottleneck in the U.S. The spread widened earlier this year to as much as $23.44 a barrel on Feb. 8, before contracting to as little as $2.96 today.

Brent, Buzzard

Brent for August settlement gained as much as 0.6 percent earlier today and traded at $108.28 on the London-based ICE Futures Europe exchange at 1:17 p.m.

The U.K.’s largest oil field, Buzzard, is returning to full production after falling below 100,000 barrels a day yesterday, according to three people with knowledge of the matter who asked not to be identified because the information is confidential. The 200,000 barrel-a-day field is now producing about 160,000 barrels a day, one of them said. Nexen Inc., which operates the field, declined to comment. Buzzard is the largest contributor to the Forties crude grade, which typically sets the price of the North Sea Dated Brent oil benchmark.

U.S. gasoline stockpiles shrank by 3.5 million barrels in the week ended July 5, the API said yesterday, according to the person who asked not to be identified because the report wasn’t publicly distributed. Supplies are forecast to rise by 1 million barrels, according to the median estimate of 11 analysts surveyed by Bloomberg before data from the EIA, the Energy Department’s statistical arm.

Summer Driving

“If people are confident about hitting the road and spending money, then they are confident about the economy,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. “This time of the year, you have to expect” a decrease in stockpiles, he said.

Distillate inventories, including heating oil and diesel, increased by 2.8 million barrels, according to the API, which has started releasing statistics on a subscription basis. A gain of 1 million barrels is projected in the survey.

U.S. refineries probably boosted processing by 0.2 percentage point to 92.4 percent of capacity last week, according to the Bloomberg survey. That would be the highest operating rate since August. Motor-fuel demand typically rises from the last weekend in May to the Labor Day weekend in early September, the peak vacation season in the U.S.

The API in Washington collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires reports to be filed with the EIA for its weekly survey, due at 10:30 a.m. Washington time.

Political Upheaval

WTI surged above $100 a barrel last week for the first time since September as Egypt’s political upheaval heightened concern that unrest in the most populous Arab country will spread and disrupt Middle East oil supplies.

The Organization of Petroleum Exporting Countries forecast the world will need less of its crude next year, even as global oil demand growth rebounds to its strongest pace since 2010, amid competing supply sources.

Demand for OPEC’s crude will slip by 300,000 barrels a day next year to 29.6 million a day next year, or about 2.6 percent less than the 12-member group is pumping now, the organization said in its first set of forecasts for 2014. The need for OPEC’s crude will diminish even as global oil demand growth recovers to 1 million barrels a day in 2014, from 800,000 a day this year, amid rising output in the U.S. and Canada.

Libyan production fell the most last month among OPEC nations, according to the group’s monthly report.

WTI is extending its rally after breaching a technical resistance level on the weekly chart, according to data compiled by Bloomberg. Futures yesterday settled above $103.39 a barrel, the 61.8 percent Fibonacci retracement of the decline to $32.40 in December 2008 from an intraday record high of $147.27 in July that year. Investors typically buy contracts when prices exceed technical resistance.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net 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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