West Texas Intermediate crude surged the most in five weeks as U.S. gasoline demand rose to the highest level since July, trimming fuel inventories.
Futures jumped after the Energy Information Administration reported that consumption of the motor fuel climbed 2.6 percent last week and gasoline supplies decreased 3.76 million, more than nine times the 400,000-barrel drop forecast by analysts in a Bloomberg survey. Crude inventories increased for a seventh week, extending the longest stretch of gains since March.
“The shocker number is the draw in gasoline,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “Demand is picking up, and it’s supportive for the market. The market is definitely responding to the products numbers. Crude oil is oversold.”
WTI for December delivery rose $1.43, or 1.5 percent, to settle at $94.80 a barrel on the New York Mercantile Exchange, the biggest one-day advance since Oct. 2. The contract dropped to $93.37 yesterday, the lowest closing price since June 4. The volume of all futures traded was 1.6 percent below the 100-day average at 3:52 p.m.
Brent for December settlement slid 9 cents to $105.24 a barrel on the London-based ICE Futures Europe exchange, the lowest close since July 2 . Volume was 19 percent above the 100-day average. The European benchmark crude was at a premium of $10.44 to WTI, compared with $11.96 yesterday.
Gasoline futures rallied 1.3 percent to $2.548 a gallon on the Nymex after settling yesterday at the lowest level since December 2011.
Consumption of the motor fuel increased to 9.29 million in the seven days ended Nov. 1, the most since July 5, the EIA, the Energy Department’s statistical arm, reported. It was the second weekly advance. Gasoline supply decreased for a fourth week to 210 million barrels, the least since Nov. 23, 2012.
The surge in demand came as the average price for regular retail gasoline in the U.S. fell to $3.265 a gallon, the lowest level since Dec. 24, according to a separate EIA report on Nov. 4. AAA, the largest U.S. motoring group, said the price fell to $3.232 a gallon nationwide yesterday, also the least since December.
“Lower gasoline pump prices are having an impact on demand,” said Gordy Elliott, a risk-management specialist at Intl FC Stone LLC in St. Louis Park, Minnesota. “Other than that, there is not much reason for demand to run up. This is not a time that we normally see gasoline demand break out.”
Inventories of distillate fuels, including diesel and heating oil, fell 4.9 million barrels to 117.8 million last week, the EIA said. Analysts had expected a drop of 1.5 million.
“Products numbers were definitely more bullish than expected,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “The gain in gasoline demand is a bit surprising.”
Supplies of crude increased 1.58 million barrels to 385.4 million, the most since June 21. The Bloomberg survey forecast a gain of 2.1 million. Inventories have climbed 29.8 million since Sept. 13. Last week’s rise was the smallest in the period.
“It’s marking the end of huge builds,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Most of the sell pressure has been factored in. I expect the market to hold firm.”
Stockpiles at Cushing, Oklahoma, where WTI futures are delivered, rose by 991,000 barrels Nov. 1 to 36.5 million barrels, the highest level since August.
WTI also increased as technical indicators showed recent losses are excessive. The futures tumbled 5.4 percent in the previous six days.
The relative strength index of front-month WTI futures fell below 30 for three days, a sign that prices are due for a rebound. The 14-day RSI index reached 25.9 yesterday, the lowest reading since June 2012, according to data compiled by Bloomberg. Futures rebounded in April from as low as $85.61 a barrel when the chart indicator was most recently below 30. The RSI rose to 33.6 today. WTI is trading below the 9-, 14- and 200-day moving averages.
“If you take a look at technicals, be it the RSI or the 9-and 14-day moving averages, we are oversold,” said Tom Finlon, director of Energy Analytics Group LLC based in Jupiter, Florida. “There are going to be up days in a bear market, and this is one of them. The crude build was a little smaller than most people anticipated.”
Four longtime oil traders claimed in a lawsuit that some of the world’s biggest oil companies including BP Plc (BP/), Statoil ASA (STL), and Royal Dutch Shell Plc (RDSA) conspired with Morgan Stanley and energy traders including Vitol Group to manipulate the closely watched spot prices for Brent for more than a decade.
The traders who brought the lawsuit allege the oil companies and energy-trading houses submitted false and misleading information to Platts, an energy news and price publisher whose quotes are used by traders worldwide, according to the proposed class action filed Oct. 4 in Manhattan federal court. The defendants used methods including “spoofing” -- placing orders that move markets with the intention of canceling them later, the filing showed.
Plaintiffs include Kevin McDonnell, a former Nymex director, as well as independent floor traders Anthony Insinga and Robert Michiels, and John Devivo, who held a seat on Nymex and traded for his own account. Representatives of Shell, Vitol, Trafigura Beheer BV, Morgan Stanley (MS) and BP declined to comment on the latest suit.
Implied volatility for at-the-money WTI options expiring in December was 20.2 percent, down from 21.8 percent yesterday, according to data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 540,729 contracts as of 3:52 p.m. It totaled 486,615 contracts yesterday, 16 percent below the three-month average. Open interest was 1.74 million contracts, the least since June 3.
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