WTI-Brent Oil Spread Narrows for First Time in Five Days

The spread between West Texas Intermediate and Brent narrowed for the first time in five days on forecasts that U.S. crude inventories shrank, their first decline since mid-September.

WTI futures advanced as much as 0.6 percent before an Energy Information Administration report tomorrow that will show crude stockpiles slid by 300,000 barrels in the week ended Nov. 22, according to a Bloomberg News survey. Brent was little changed. Oil prices fell in London and New York yesterday after Iran and world powers reached an interim agreement on Nov. 24 to restrict the Persian Gulf nation’s nuclear program.

“Robust underlying demand suggests that it is not all doom and gloom out there,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd. in London.

WTI for January delivery gained as much as 60 cents to $94.69 a barrel in electronic trading on the New York Mercantile Exchange. It was at $94.27 as of 1:25 p.m. London time. Its discount to Brent narrowed to $16.64 a barrel after settling at $16.91 yesterday, the widest in more than eight months. The volume of all futures traded was about 46 percent below the 100-day average.

Brent for January settlement traded 8 cents lower at $110.92 a barrel on the London-based ICE Futures Europe exchange, having earlier fallen as much as 48 cents to $110.52.

Distillate Supplies

Distillate inventories, including heating oil and diesel, are forecast to have fallen by 1.03 million, to a five-year low of 111.5 million barrels last week according to the median estimate of seven analysts in the Bloomberg survey. Gasoline supplies probably climbed by 1 million barrels.

WTI declined in the six weeks through Nov. 15, the longest losing streak in 15 years, as U.S. crude inventories expanded amid a surge in production. Stockpiles have risen to 388.5 million barrels, the most since June, according to the EIA, the Energy Department’s statistical arm.

The American Petroleum Institute in Washington is scheduled to release separate stockpile data today. The industry group collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA.

Iran Pact

Brent, the benchmark grade for half the world’s oil, lost as much as 2.7 percent in intraday trade yesterday, the most since Nov. 1, after the interim accord was reached on Nov. 24. It closed down 0.1 percent at $111 a barrel. Crude exports from Iran, a member of the Organization of Petroleum Exporting Countries, will be held at about 1 million barrels a day under sanctions that remain in force, according to the White House.

The six-month agreement, which offers Iran about $7 billion in relief from penalties in exchange for curbs on its nuclear program, leaves in place banking and financial measures that have hampered its crude exports.

“We have now removed Iran as the main geopolitical threat,’ said Frank Klumpp, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, Germany. ‘‘It’s a bit surprising the market isn’t falling harder on the de-escalation. But then, most market participants know that there’s no supply from Iran quickly coming back to the market and no quick return to full production.”

Iran shipped 715,000 barrels a day in October, down from 1.26 million in the previous month, the International Energy Agency said in its monthly report on Nov. 14. Exports averaged 1.1 million barrels a day in the first nine months of this year, according to the energy adviser to developed nations.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.