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WTI Crude Falls After U.S. Supply at Three-Month High

West Texas Intermediate fell as crude inventories increased to the highest level in three months in the U.S., the world’s biggest oil-consuming country.

Futures slid 1.6 percent after the Energy Information Administration said supplies rose 4 million barrels to 374.5 million in the week ended Oct. 11, the most since June 28. A 3 million-barrel gain was forecast in a Bloomberg survey. Refinery operating rates have declined in three of the last four weekly reports from the EIA.

“Inventories are rising because of lackluster demand from refineries during turnarounds,” said Stephen Schork, president of the Schork Group Inc., an energy advisory company in Villanova, Pennsylvania. “We’re in the middle of the trend and should continue to see supply gains for several more weeks.”

WTI crude for November delivery, which expires tomorrow, fell $1.59 to $99.22 a barrel on the New York Mercantile Exchange. It was the lowest settlement since July 1. The more actively traded December contract decreased $1.43, or 1.4 percent, to close at $99.68. The volume of all futures traded was 7 percent higher than the 100-day average at 4:10 p.m.

Brent oil for December settlement slipped 30 cents, or 0.3 percent, to end the session at $109.64 a barrel on the London-based ICE Futures Europe exchange. Volume was 24 percent lower than the 100-day average. The European benchmark traded at a $9.96 premium to WTI, the most since April 26 and up from $8.83 at the Oct. 18 close.

Delayed Release

The EIA, the Energy Department’s statistical arm, postponed the data release because of the 16-day partial government shutdown that ended Oct. 17.

Refineries operated at 86.2 percent of capacity, up 0.2 percentage point from the prior week. Utilization rates usually peak during the summer months when U.S. gasoline demand rises and decline as the season comes to an end.

Nationwide supplies have climbed 18.9 million barrels in the last four weekly reports, the longest stretch of gains since the first quarter, EIA data show. Inventories at Cushing, Oklahoma, the delivery point for WTI traded in New York, jumped 366,000 barrels to 33 million. It was the first increase since June. Supplies at the hub have decreased as improved pipeline networks and shipments by rail eased a North American supply glut created by rising oil production from shale formations.

Production Slips

U.S. crude output fell 4.9 percent to 7.43 million barrels a day, a three-month low, according to the EIA. Output surged last month to the highest level since 1989 as the combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in the central part of the country.

Gasoline stockpiles dropped 2.57 million barrels to 217.3 million. Supplies of distillate fuel, a category that includes heating oil and diesel, declined 1.8 million barrels to 124.2 million.

President Barack Obama signed a bill Oct. 17 to reopen the government through Jan. 15 and extend its borrowing authority to Feb. 7.

“We’re probably under some additional downward pressure because the issues that caused the recent government shutdown haven’t been solved,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “They’ve just been kicked down the road.”

Adequately Supplied

Global oil markets are adequately supplied, and prices in a range of $100 to $110 a barrel are suitable for consumers and producers, Abdalla El-Badri, secretary-general of the Organization of Petroleum Exporting Countries, said at a conference today in Muscat, Oman.

OPEC’s biggest member, Saudi Arabia, pumped more crude in August than Russia and boosted exports to the highest level in 14 months, according to the Joint Organizations Data Initiative. Saudi Arabia produced 10.2 million barrels a day in the month, up 160,000 from July, and shipped 7.8 million, the most since June 2012, data on JODI’s website showed yesterday. Russia pumped 10.1 million barrels a day in August.

U.S. and European diplomats described negotiations held on Oct. 15-16 in Geneva to resolve differences over Iran’s nuclear program as detailed and substantive. International sanctions on Iran have hobbled the nation’s oil exports and the financial system supporting them.

‘Positive Indications’

“There’s a lot working against the bulls,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We are looking at rising inventories in the U.S., and there were positive indications coming out of the Iranian talks in Geneva.”

Nigeria’s Movement for the Emancipation of the Niger Delta said it plans to escalate a violent campaign of disruption to oil output in Africa’s leading producer. Attacks including kidnappings and bombing of oil installations by groups including MEND cut more than 28 percent of Nigeria’s oil output from 2006 to 2009, according to data compiled by Bloomberg.

Implied volatility for at-the-money WTI options expiring in December was 19.9 percent, up from 19.1 percent from Oct. 18, according to data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 602,194 contracts as of 4:10 p.m. It totaled 510,007 contracts Oct. 18, 13 percent lower than the three-month average. Open interest was 1.81 million contracts.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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