WTI Crude Rises to Six-Week High on U.S. Supply Forecast

West Texas Intermediate crude rose to a six-week high on projections of a second consecutive drop in U.S. inventories. The spread between WTI and Brent oil from the North Sea tightened to the narrowest in a month.

Futures climbed 1.2 percent in New York. A government report tomorrow will probably show crude supplies slipped by 3 million barrels last week, according to the median of 10 analyst responses in a Bloomberg survey. The Brent-WTI spread has shrunk more than $8 since Nov. 27. A Libyan security official said today that three oil ports will reopen Dec. 15.

“WTI is higher because we’re expecting a second supply draw, which will tighten the fundamentals,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The WTI-Brent spread is also coming in because of falling U.S. supply and speculation that increased Libyan supply will soon be on the market.”

WTI for January delivery rose $1.17 to close at $98.51 a barrel on the New York Mercantile Exchange. It was the highest settlement since Oct. 28. The volume of all futures traded was 14 percent above the 100-day average at 5:14 p.m.

Crude was little changed from the settlement after the American Petroleum Institute said U.S. inventories fell 7.5 million barrels last week, bringing the two-week drop to 19.9 million. Futures advanced $1.18, or 1.2 percent, to $98.52 at 4:46 p.m. in electronic trading. The price was $98.41 before the report was released at 4:30 p.m.

Brent for January settlement declined 1 cent to end the session at $109.38 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded was 34 percent higher than the 100-day average.

Narrowing Spread

The European benchmark closed at a $10.87 premium to WTI, the narrowest at settlement since Nov. 8. The spread widened to $19.38 during trading on Nov. 27, the most since March.

Refinery utilization rates increased 0.5 percentage point to 92.9 percent last week, the highest level since July 2012, according to the Bloomberg survey.

Weekly petroleum consumption climbed 1.7 percent to 20 million barrels a day in the week ended Nov. 29, the Energy Information Administration, the Energy Department’s statistical arm, said Dec. 4. Demand was 8.9 percent higher than during the same period in 2012.

“Refiners are responding to strong product demand by increasing utilization,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We’re starting to see an impact on crude stocks. WTI is on the mend and is closing the gap with Brent as a result.”

Fuel Stockpiles

U.S. gasoline supplies probably gained 2 million barrels in the seven days ended Dec. 6, according to the survey. Stockpiles of distillate fuel, a category that includes heating oil and diesel, rose by 1.55 million.

The EIA said that the shutdown of federal government offices in Washington today because of snowy weather won’t affect tomorrow’s scheduled release of data.

Brigadier Idris Bukhamada, head of Libya’s Petroleum Facilities Guard, said that Es Sider, Ras Lanuf and Zueitina ports will reopen Dec. 15. Es Sider and Ras Lanuf are the North African country’s two biggest export terminals with combined capacity of 600,000 barrels a day.

Libyan output slipped 40,000 barrels a day to 210,000 in November, the lowest level since September 2011, a Bloomberg survey of oil companies, producers and analysts showed. Two years after the war that swept the late Muammar Qaddafi from power, Libyan government efforts to revive the oil industry are being stymied by feuding militias and protests.

OPEC Production

The Organization of Petroleum Exporting Countries pumped 29.63 million barrels last month compared with 29.83 million in October, OPEC said in its monthly oil market report today, citing data from secondary sources. That’s the lowest level since May 2011. The 12-nation group decided to maintain its output limit of 30 million at a meeting in Vienna last week.

The International Energy Agency, the Paris-based adviser to developed countries, will release its monthly report tomorrow.

WTI surged 5.3 percent last week and the WTI-Brent spread tightened after U.S. crude inventories declined for the first time in 11 weeks and TransCanada Corp. said it started filling its Keystone pipeline to the Gulf Coast from Cushing, Oklahoma, the delivery point for Nymex futures.

TransCanada began moving oil into the southern portion of the Keystone pipeline on Dec. 7, Shawn Howard, a spokesman based in Calgary, said in an e-mailed statement. The company will inject 3 million barrels in the coming weeks, he said.

Keystone XL

The company estimates it will begin taking receipts and delivering oil via the line in mid- to late January, a bulletin showed. The pipeline to Port Arthur, Texas, will have a capacity of 700,000 barrels a day.

Implied volatility for at-the-money WTI options expiring in February was 15.7 percent, down from 16.1 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 589,585 contracts as of 5:14 p.m. It totaled 502,710 contracts yesterday, 12 percent below the three-month average. Open interest was 1.65 million contracts.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to 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.