WTI Rises on U.S. Supply Dip as Discount to Brent Shrinks

West Texas Intermediate advanced for a fourth day, the longest rising streak since August, as TransCanada Corp. will start part of its Keystone XL pipeline next month and U.S. crude inventories fell. The spread between WTI and Brent shrank to a nine-day low.

Futures climbed as much as 1.6 percent in New York after the American Petroleum Institute said crude stockpiles shrank by 12.4 million barrels last week. Prices gained the most since September yesterday after TransCanada said it will begin the southern portion of the pipeline to the Gulf Coast that could relieve a supply bottleneck. OPEC agreed to maintain its production target at 30 million barrels a day, Saudi Arabia’s Oil Minister Ali al-Naimi told reporters today in Vienna.

WTI was boosted by a “sharp drop in U.S. crude oil stocks reported by the API overnight plus news that Keystone XL South would start in early January,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt.

The decision by the Organization of Petroleum Exporting Countries to roll over its output limit is “no surprise,” Fritsch said. “The big question is what OPEC will do if output from Libya and Iran returns to the market next year; this topic was not on the agenda today, but will probably be discussed at the next meeting in six months.”

WTI for January delivery increased as much as $1.49 to $97.53 a barrel in electronic trading on the New York Mercantile Exchange and was at $96.91 as of 1:18 p.m. London time. The contract rose $2.22 to $96.04 yesterday, the highest close since Oct. 31. The volume of all futures traded was 83 percent more than the 100-day average. Prices are up 5.7 percent this year.

Keystone Pipeline

Brent for January settlement was down 82 cents at $111.80 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $15.01 to WTI, the narrowest since Nov. 21 on closing basis.

“WTI has been more and more dependent on fundamentals within the U.S.,” said Abhishek Deshpande, an oil market analyst at Natixis SA in London.

WTI traded at about $18 a barrel below Brent in January as stockpiles at Cushing in Oklahoma, climbed to a record 51.9 million barrels, according to the Energy Information Administration, the Energy Department’s statistical arm. The oil-storage hub is the biggest in the U.S. and the delivery point for Nymex crude contracts.

Wide Discount

Calgary-based TransCanada plans to start deliveries from Jan. 3 to Port Arthur in Texas, via the segment of the Keystone expansion project from Cushing, a government filing showed yesterday.

“Further de-bottlenecking at Cushing with the Keystone pipeline extension to Port Arthur could boost WTI and narrow the wide discount” to Brent, Gordon Kwan, the regional head of oil and gas research at Nomura Holdings Inc. in Hong Kong, said today in an e-mail.

Crude inventories nationwide dropped to 377.8 million barrels in the seven days ended Nov. 29, the first decline in 10 weeks, the industry-funded API said. Supplies are projected to have slid by 500,000 barrels, according to the median estimate of 10 analysts surveyed by Bloomberg News before the EIA report.

“A crude draw would be the first in 10 weeks signaling the start of a period of higher refining and further draws, thus the start of a tightening of Brent-WTI spread,” said Bjarne Schieldrop, chief commodity analyst at SEB AB in Oslo.

Gasoline stockpiles decreased by 119,000 barrels last week, the API data show. Supplies are forecast to have gained 1.3 million, according to the survey. Distillate fuels, including heating oil and distillates, increased by 540,000 barrels, compared with a projected 1.5 million drop.

OPEC, which pumps about 40 percent of the world’s oil, will hold its next meeting on June 11, Naimi said today.

“We are all satisfied,” Naimi told reporters at the end of a three-hour meeting in Vienna.

To contact the reporter on this story: Sherry Su in London at lsu23@bloomberg.net

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

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