WTI Drops to One-Week Low on Fed Speculation, Libya Start

West Texas Intermediate crude traded near its lowest in more than a week amid speculation the Federal Reserve will reduce economic stimulus and as Libya prepared to open some oil ports closed by labor unrest.

Futures lost as much as 0.7 percent. The Federal Open Market Committee will publish minutes of a July meeting today, with 65 percent of economists surveyed by Bloomberg News predicting the Fed will taper bond purchases in September. Enterprise Products Partners LP (EPD) said the Seaway pipeline, which carries crude from the U.S. storage hub in Cushing, Oklahoma, to the Gulf Coast, is operating normally.

“The latest news could lead to increasing Libyan oil production in the short term,” said Hannes Loacker, an analyst at Raiffeisen Bank International AG (RBI) in Vienna. “If Libya is going back to normal, although we are very far from that, this would be a drag” for prices, he said.

WTI for October delivery slid as much as 76 cents to $104.35 a barrel in electronic trading on the New York Mercantile Exchange and was at $104.94 as of 2:09 p.m. London time. The volume of all futures traded was about 1 percent below the 100-day average. The September contract expired at $104.96 yesterday after losing 2 percent, the biggest one-day closing loss since June 20.

Brent for October settlement lost as much as 92 cents, or 0.8 percent, to $109.23 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $4.87 to WTI. The spread was $5.04 yesterday, the widest since June 28.

Fuel Supplies

The Seaway line, which can carry 400,000 barrels a day from Cushing to Houston, is functioning normally, Enbridge spokesman Rick Rainey said by phone. Genscape Inc., a Louisville, Kentucky-based energy information company, reported it was “essentially shut” yesterday after decreased power consumption was observed at all pumping stations.

An Energy Information Administration report today may show U.S. crude stockpiles shrank by 1.5 million barrels last week. Inventories dropped 1.2 million barrels in the week ended Aug. 16, data from the industry-funded American Petroleum Institute showed yesterday, said two people familiar with the report.

Gasoline inventories fell 3.7 million barrels, according to the API data. Supplies probably decreased 1.5 million, a median estimate of 11 analysts surveyed before today’s report from the EIA, the Energy Department’s statistical unit showed.

Libyan Output

Distillate supplies, including heating oil and diesel, declined 1.8 million barrels, according to the API. They are projected to increase by 1 million, the survey showed.

Refinery operating rates are expected to have slid by 0.5 percentage points. U.S. refiners typically boost output to meet increased fuel demand during the summer driving season from late May to early September.

Libya prepared to open some ports as the government vied with nation’s Petroleum Facility Guard for control of export facilities. The Zueitina and Hariga terminals are ready to resume exports, the Oil Ministry said yesterday. The country’s navy said it would seize any tankers attempting illicit loadings.

Libya produced 800,000 barrels a day of crude last month, half the rate a year earlier, according to a Bloomberg survey of output from the 12-member Organization of Petroleum Exporting Countries. It holds Africa’s largest oil reserves.

WTI may rebound on technical support, data compiled by Bloomberg shows. Futures yesterday halted their decline near an upward-sloping trend line connecting the lows of June 24 and Aug. 8., which is at about $104.90 a barrel today. Buy orders tend to be clustered around chart-support levels.

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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