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WTI Advances to Two-Week High as U.S. Inventories Decline

West Texas Intermediate advanced to match a two-week high after the U.S., the world’s largest crude consumer, reported a larger-than-forecast drop in inventories.

Futures rose as much as 0.5 percent, reversing earlier losses. U.S. crude stockpiles slid by 7.66 million barrels to 350.2 million in the seven days ended Jan. 10, according to data yesterday from the Energy Information Administration. That was more than five times a 1.3 million drop forecast in a Bloomberg News survey. OPEC oil production fell to the lowest level since May 2011, while the organization forecast demand for its crude this year will remain below the group’s agreed output target.

“WTI is simply extending yesterday’s gains when it was propped higher by a large draw in U.S. crude oil stocks that was not offset by a commensurate rise in product stocks,” Harry Tchilinguirian, a London-based analyst at BNP Paribas SA, said today by e-mail.

WTI for February delivery climbed as much as 47 cents to $94.64 a barrel in electronic trading on the New York Mercantile Exchange. It was at $94.19 as of 1:30 p.m. London time. The volume of all futures traded was 11 percent below the average for the past 100 days, according to data compiled by Bloomberg.

Brent for February settlement, which expires today, fell 40 cents to $106.73 a barrel on the London-based ICE Futures Europe exchange. The more-active March contract fell 34 cents to $105.93. The European benchmark crude was at a premium of $12.52 to WTI, compared with $12.66 yesterday.

‘Massive Draws’

Prices rose on “massive inventory draws yesterday,” said Andrey Kryuchenkov, an analyst at VTB Capital in London.

Crude inventories shrank as imports decreased 13 percent last week, the most since September 2012, according to the EIA report. Stockpiles at Cushing, Oklahoma, the largest U.S. oil-storage hub and the delivery point for WTI futures, expanded by 145,000 barrels to 40.9 million.

Distillate supplies, including heating oil and diesel, declined 1.02 million barrels, said the EIA, the Energy Department’s statistical arm. Supplies were projected to have climbed by 1.25 million, according to the median estimate of 11 analysts surveyed by Bloomberg.

The Organization of Petroleum Exporting Countries, responsible for 40 percent of the world’s oil supply, said output from its 12 members slid by 20,000 barrels a day to 29.44 million a day in December amid declines in Iraq and Saudi Arabia. That’s less than the average of 29.6 million a day the group predicts will be required in 2014 and below the 30 million ceiling it reaffirmed in December.

Sharara Field

In Libya, operations have returned to normal at the Sharara field as protesters are satisfied with the government’s response to their demands, said Mustafa Lamin, a spokesman for the group. The country’s production was 570,000 barrels a day yesterday, Mohamed Elharari, a spokesman for state-run National Oil Corp., said by phone from Tripoli today. Libya holds Africa’s biggest crude reserves.

Europe is days from suspending a ban on reinsurance for tankers hauling Iranian oil, a measure that helped cut crude exports from the country by more than 50 percent, the International Group of P&I Clubs said. The relaxation will take effect on Jan. 20 and last for at least six months, Andrew Bardot, the executive officer of the International Group, said by e-mail today.

“The sanctions on oil are not lifted, only sanctions around transportation and insurance will be suspended,” Abhishek Deshpande, an analyst at Natixis SA, said in an e-mail. “To some extent we will see some increase in Iranian oil exports to countries including India, China, South Africa, South Korea, Japan. But they will all stick to the U.S.-led quotas on Iranian oil imports.”

WTI has technical support along the so-called neckline of a head-and-shoulders formation, at about $91.90 a barrel today, according to data compiled by Bloomberg. Futures are rebounding from this level this week. Buy orders tend to be clustered around chart-support levels.

To contact the reporter on this story: Lananh Nguyen in London at lnguyen35@bloomberg.net

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

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