WTI Trims Fourth Gain in Five Years Before Inventory Data

West Texas Intermediate trimmed its fourth annual increase in five years amid lower-than-average volumes before weekly U.S. government data on stockpiles.

Futures slipped as much as 0.8 percent in New York for a second daily loss. Crude inventories probably dropped by 2.9 million barrels in a fifth consecutive decline last week as refineries operated at the highest rate in five months and oil companies pared stockpiles to reduce year-end taxes, according to a Bloomberg News survey. Brent is little changed this year after four consecutive annual increases. Libya restored output from the Messla field, state-run National Oil Corp. said.

“Hopes about a strong recovery in U.S. oil demand” are rising “as risk appetite improves following strong U.S. economic data and sharp declines in crude oil inventories,” said Myrto Sokou, senior analyst at Sucden Financial Ltd. in London. “There have been renewed signs that crude oil production in Libya may be starting to recover.”

WTI for February delivery dropped as much as 78 cents to $98.51 a barrel in electronic trading on the New York Mercantile Exchange and was at $98.58 as of 1:23 p.m. London time. On Dec. 27 it settled above $100 a barrel for the first time since October. The volume of all contracts traded was about 59 percent below the 100-day average. Prices have risen 6.5 percent this month and 8 percent in 2013.

Brent for February settlement declined 37 cents to $110.84 a barrel on the London-based ICE Futures Europe exchange. The grade has lost 0.2 percent this year. The European crude was at a premium of $12.28 to WTI, compared with $11.97 yesterday.

Chemical Weapons

“We’ve had quite a sizable gain already and some traders are deciding to take a bit off the table before we head into the new year,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone today.

WTI is set for the biggest annual advance since 2011 as new pipelines disperse a glut of crude around the nation’s storage hub at Cushing, Oklahoma. The grade settled at $110.53 a barrel on Sept. 6, the highest close this year, as escalating tension over Syria’s use of chemical weapons fanned concern that Middle East oil shipments may be disrupted.

U.S. crude inventories are forecast to have decreased to 364.7 million barrels in the week ended Dec. 27, according to the median estimate of seven analysts surveyed by Bloomberg before Energy Information Administration data on Jan. 3.

Bullish Bets

Crude supplies declined by 23.8 million barrels over the previous four weeks, according to data from the EIA, the Energy Department’s statistical arm, published on Dec. 27. Refiners operated at an average 92.7 percent of capacity. Stockpiles have dropped every December since 2005 as companies in Gulf Coast states delay imports and minimize supplies at the end of the year to reduce local taxes.

Hedge funds increased bullish bets on WTI to a three-month high, according to the U.S. Commodity Futures Trading Commission. Money managers boosted net-long positions, or wagers on rising prices, by 4.4 percent in the seven days through Dec. 24, a fourth weekly gain.

Brent futures are little changed this year even as supply from Libya, holder of Africa’s largest crude reserves, slumped after protesters seized control of oil fields and export terminals in July, and instability in South Sudan disrupted its crude output. Libyan production fell to 210,000 barrels a day in November from a high of 1.4 million in March, data compiled by Bloomberg show.

Libya’s Messla field has restored output to 25,000 barrels a day, state-run National Oil Corp. said on its website.

The main oil producing region in South Sudan is safe from the rebellion led by former South Sudanese Vice-President Riek Machar, Major General Gregory Vasili, an oil defense force commander, told reporters yesterday. South Sudan’s production has fallen to 200,000 barrels a day, from 245,000, the state-run Nile Petroleum Corp. said Dec. 29.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

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

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.