West Texas Intermediate crude fell from a six-week high after gasoline and diesel inventories rose more than forecast last week as refineries boosted output.
Prices dropped 1.1 percent. The Energy Information Administration said stockpiles of the fuels jumped about three times as much as estimated in a Bloomberg survey of analysts, gaining the most since January. The increase contributed to the biggest slide in oil stocks in about a year.
“The product numbers are just not that good,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “You are seeing a big drawdown in crude as refinery runs remain elevated, but clearly the products are not being absorbed.”
WTI for January delivery slipped $1.07 to settle at $97.44 a barrel on the New York Mercantile Exchange. It was the biggest decline since Nov. 27. The contract settled at $98.51 yesterday, the highest close since Oct. 28. The volume of all futures traded was 24 percent above the 100-day average at 4:03 p.m.
Brent for January settlement decreased 32 cents, or 0.3 percent, to end the session at $109.70 a barrel on the London-based ICE Futures Europe exchange. Volume was 5.4 percent below the 100-day average.
The European benchmark crude closed at a $12.26 premium to WTI. The spread was $10.87 at yesterday’s settlement, the narrowest since Nov. 8 based on closing prices.
Gasoline futures dropped 2.18 cents, or 0.8 percent, to $2.6611 a gallon on the Nymex, the lowest settlement since Nov. 19. Ultra low sulfur diesel rose 0.39 cent to $3.0212.
Gasoline stockpiles jumped 6.72 million barrels to 219.1 million barrels in the EIA report, more than the 2 million-barrel forecast by analysts surveyed by Bloomberg. They were at the highest level since Oct. 4. Demand for the motor fuel slid to 8.35 million barrels a day last week, falling for the fifth consecutive time.
Inventories of distillate, including diesel and heating oil, increased 4.54 million to 118.1 million. They were predicted to rise 1.55 million. Distillate fuel production climbed 3 percent to 5.26 million barrels a day, the highest level since at least 1986, as consumption decreased.
Gains in both gasoline and distillate stockpiles were the biggest since Jan. 4, according to the EIA, the Energy Department’s statistical arm. Refineries operated at 92.6 percent of capacity, the most since July 12.
Crude supplies tumbled 10.6 million barrels to 375.2 million, more than triple the decrease of 3 million barrels forecast by analysts in the Bloomberg survey. The drop was the biggest since Dec. 28. Inventories have fallen 16.2 million barrels in the past two weeks.
“It’s a tremendous withdrawal for crude,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “At the same time, you also see big builds in gasoline and distillates, which offset the importance of the big crude draw.”
Companies in Gulf Coast states typically delay imports and minimize supplies at the end of the year to reduce local taxes. Supplies in the Gulf states, known as PADD 3, dropped 7.2 million last week, comprising almost 70 percent the total decline.
“You typically see crude-oil inventories fall into the end of the year,” O’Grady said.
Stockpiles at Cushing, Oklahoma, the delivery point for Nymex futures, rose 625,000 barrels to 41.2 million, the highest level since July 26. Domestic production climbed to 8.08 million barrels a day, the most since 1988.
WTI jumped 6.2 percent this month through yesterday on speculation that stronger growth will boost demand.
“If prices go up too far too fast, we will fall back,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.
Futures also followed declines in U.S. equities as investors weighed a budget deal reached by U.S. lawmakers and prospects for Federal Reserve stimulus. The Standard & Poor’s 500 Index slid 1.1 percent, and the Dow Jones Industrial Average retreated 0.8 percent.
The International Energy Agency raised estimates for 2014 global oil demand because of an economic recovery in the U.S. World oil demand will increase by 1.2 million barrels a day, or 1.3 percent, next year to 92.4 million, the IEA said today in its monthly oil market report. The agency raised its projection from last month by 240,000 barrels a day.
“Demand has started to surprise to the upside in the U.S. and Europe, hence we’ve seen a few short-covering rallies,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a London-based consultant.
Implied volatility for at-the-money WTI options expiring in February was 16.2 percent, up from 15.7 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 629,691 contracts as of 4:03 p.m. It totaled 642,047 contracts yesterday, 12 percent above the three-month average. Open interest was 1.66 million contracts.
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