West Texas Intermediate was little changed as the Federal Reserve said it might reduce stimulus “in coming months,” countering a report that showed fuel consumption climbed to a five-year high.
Prices dropped 1 cent. The Fed may pare the $85 billion in monthly bond purchases as the economy improves, minutes of the Federal Open Market Committee’s last meeting that were released today showed. Petroleum demand averaged over four weeks reached 20.3 million barrels a day last week, the most since August 2008, the Energy Information Administration said.
“The Fed’s comments suggest that we may see less money floating around in the financial world, and that could depress the prices of a number of assets including oil,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The EIA report shows that we are seeing some strength in demand.”
WTI for December delivery, which expired today, settled at $93.33 a barrel on the New York Mercantile Exchange. The more active January contract slid 4 cents to $93.85. The volume of all futures traded was 22 percent below the 100-day average.
Brent for January settlement advanced $1.14, or 1.1 percent, to $108.06 a barrel on the London-based ICE Futures Europe exchange. Volume was 16 percent below the 100-day average. The January contract was at a premium of $14.21 to WTI for the same month. The spread was $13.03 yesterday, the narrowest in a week based on closing prices.
Policy makers “generally expected that the data would prove consistent with the committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months,” according to the record of the Fed’s Oct. 29-30 gathering.
The release of the minutes came after the EIA reported the increase in petroleum demand. Four-week average total demand increased 2.8 percent last week, a fourth consecutive gain. Consumption of distillate fuels, including diesel and heating oil, jumped 6.4 percent, and gasoline usage went up 0.4 percent. The government measures shipments from refineries, pipelines and terminals to calculate demand.
“Refinery product demand is the primary fundamental driver of higher prices,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “We should have every expectation of continued strong refinery product demand. Demand is driven by exports.”
Distillate exports were at a four-week average of 1.36 million barrels a day. They reached 1.39 million in the period ended Oct. 11, the most since EIA data started in June 2010.
On a weekly basis, total fuel demand reached 20.4 million barrels a day in the seven days ended Nov. 15, the highest level since December 2010. It was the fourth straight increase.
Crude stockpiles grew 375,000 barrels, below the 1 million-barrel increase forecast by analysts surveyed by Bloomberg. Supplies went up for a ninth week to 388.5 million barrels. Stockpiles at Cushing, Oklahoma, WTI’s delivery point, climbed to 39.9 million, the most since July 26.
“While the crude inventory build came in lower than expected, any price rise will be short term,” said Adam Wise, who helps manage a $6 billion oil and gas bond portfolio as a managing director at Manulife Asset Management in Boston. “There are still very robust supplies, at least domestically.”
Inventories of distillate fuels, including heating oil and diesel, fell 4.8 million barrels to 112.5 million, the least since Nov. 23, 2012. The analyst forecast was for a decline of 280,000. Gasoline stockpiles dropped 345,000 to 208.9 million, near the estimated decrease of 300,000.
Crude has declined 7.4 percent in the past month on rising inventories and easing of global political tension. Iran and the five permanent members of the United Nations Security Council plus Germany are negotiating to break a decade-long deadlock and help remove sanctions against Iran which have cut oil exports.
“There are still larger concerns about the geopolitical situation,” said David McAlvany, chief executive officer of McAlvany Financial Group in Durango, Colorado. “The market has been preoccupied for a long time with when quantitative easing will go.”
Iran was the sixth-largest producer in the Organization of Petroleum Exporting Countries last month with 2.6 million barrels a day, according to a Bloomberg survey. That’s down 565,000 barrels from June 2012, when it was ranked second.
“If we can get an Iran deal done, we will break below the $90 level,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors.
Implied volatility for at-the-money WTI options expiring in January was 17.3 percent, down from 17.7 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 407,959 contracts as of 3:04 p.m. It totaled 591,367 contracts yesterday, 2.5 percent above the three-month average. Open interest was 1.62 million contracts, the least since Feb. 8.
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