West Texas Intermediate crude rose on speculation that increasing refinery profits from making gasoline and heating oil will bolster use of the raw material.
Futures advanced 0.9 percent as the margin to turn crude into fuel, expressed by the so-called crack spread, climbed to the highest level since August. Gasoline jumped on forecasts that a government report tomorrow will show supplies fell for a fifth week. WTI’s discount to Brent oil widened to the most in seven months as unrest in Libya disrupted exports.
“Gasoline is leading the way,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “The crack spread is strong, and that’s pulling WTI higher.”
WTI for December delivery went up 84 cents to settle at $93.88 a barrel on the New York Mercantile Exchange. The contract tumbled $2.10 to $93.04 yesterday, the lowest close since May 31. The volume of all futures traded was 26 percent higher than the 100-day average at 4:43 p.m.
Prices reduced gains after the American Petroleum Institute reported inventories at Cushing, Oklahoma, the delivery point for WTI futures, rose 1.67 million barrels last week. U.S. total supply increased 599,000. WTI climbed 62 cents, or 0.7 percent, to $93.66 a barrel at 4:43 p.m. in electronic trading. It was $93.77 before the report was released at 4:30 p.m.
Gasoline for December delivery advanced 4.16 cents, or 1.6 percent, to settle at $2.628 a gallon in New York. Ultra-low-sulfur diesel for December delivery rose 4.45 cents, or 1.6 percent, to $2.8977 a gallon.
The profit from processing three barrels of crude into two of gasoline and one of heating oil, based on New York futures settlement prices, rose 95 cents to $20.27 a barrel, topping $20 for the first time since Aug. 1.
An Energy Information Administration report tomorrow will show that gasoline inventories fell 900,000 barrels last week, based on the median of 11 analyst estimates in a Bloomberg survey. Gasoline supplies slid 9.84 million barrels in the four weeks ended Nov. 1.
Refineries operated at 87.4 percent of capacity in the week ended Nov. 8, up 0.6 percentage point from the prior period, the survey showed. Refiners scheduled maintenance in September and October after the end of the peak-gasoline-demand summer months.
“Gasoline is still rising in response to last week’s inventory report, which is an overreaction,” Cooper said. “As refineries increase operating rates, you’ll see a lot of reports that gasoline supplies are rising, while crude supplies drop.”
Crude stockpiles probably climbed by 800,000 barrels in the week ended Nov. 8. Supplies surged 8.4 percent to 385.4 million barrels, the most since June, in the seven weeks ended Nov. 1.
“Tomorrow’s report should show another build in crude supplies, but not one as extreme as in previous weeks because of an increase in refinery runs,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “Seasonal maintenance is coming to an end and the gasoline and heating oil cracks are really strong.”
The EIA, the Energy Department’s statistical arm, is releasing its data a day later than usual because of the Veterans Day holiday on Nov. 11.
Brent rose and the spread with WTI widened as demonstrators at Libya’s Hariga port stopped a tanker from loading. The African country pumped 250,000 barrels on Nov. 10, said Mohamed Elharari, a spokesman for state-run National Oil Corp. That’s down from an average of 1.28 million barrels a day in the first six months of this year, according to Bloomberg data.
Iran and six world powers ended a meeting over the weekend without coming to an agreement on the nation’s nuclear program. The U.S. and the European Union tightened sanctions on Iran in July 2012 to curb its atomic activities.
“We’re now looking at two separate oil markets that are moving different factors,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $112 billion of assets. “Brent is moving higher because of sanctions against Iran and unrest in Libya, while WTI has been under pressure because in the U.S. there’s plenty of inventory and production.”
Brent for December settlement, which expires tomorrow, increased $1.31, or 1.2 percent, to end the session at $107.12 on the London-based ICE Futures Europe exchange. The more-active January contract rose $1.35, or 1.3 percent, to $106.89. Volume was 25 percent above the 100-day average.
December Brent rose to a $13.24 premium to WTI contract from the same month, which is up from $12.77 yesterday and the highest on a closing basis since April 2.
The spread “breached $14 overnight for the first time since April,” Yawger said. “We’re at a critical level here and will have to see if the spread widens to $15, something that hasn’t happened since March.”
Kuwaiti Oil Minister Mustafa Al-Shemali said he expects no change in the crude production target for the Organization of Petroleum Exporting Countries when the group’s oil ministers meet next on Dec. 4 in Vienna.
“I don’t see a lot coming out of the next meeting other than assertions that members will do what’s necessary to defend $100 oil,” Haworth said.
The U.S. will surpass Russia and Saudi Arabia as the world’s largest oil producer by 2015, approaching energy self-sufficiency in the next two decades on booming output from shale formations, the International Energy Agency said yesterday.
Implied volatility for at-the-money WTI options expiring in January was 18.4 percent, down from 18.8 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 692,109 contracts as of 4:43 p.m. It totaled 804,101 contracts yesterday, 40 percent above the three-month average. Open interest was 1.74 million contracts.
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