WTI Rises to Four-Week High as U.S. Chill Boosts Demand

West Texas Intermediate rose to its highest level in four weeks as cold weather in the U.S. boosted demand for heating fuel in the world’s largest oil consumer.

Futures advanced as much as 0.6 percent in New York. Demand for distillate, which includes heating oil and diesel, surged to the highest level in almost six years amid freezing weather in the U.S., data from the Energy Information Administration showed yesterday. WTI slipped yesterday after the Federal Reserve said it would continue stimulus cuts. Brent crude was little changed as a Chinese manufacturing gauge signaled the first contraction in six months in January.

“Now we have extreme cold in the U.S., it does increase demand for refined products and that will lower crude stockpiles,” Hans van Cleef, an energy economist at ABN Amro Bank NV in Amsterdam, said by telephone. “We see Fed tapering going on. At some point the strong recovery in the U.S. will lead to a strong dollar and that should have an impact on commodity prices.”

WTI for March delivery gained as much as 61 cents to $97.97 a barrel in electronic trading on the New York Mercantile Exchange and was at $97.78 as of 1:15 p.m. London time. The volume of all futures traded was about 36 percent below the 100-day average. Prices are down 0.6 percent this month, the worst performance for January since 2010.

Brent for March settlement rose 4 cents to $107.89 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $10.15 to WTI contracts on the ICE exchange, compared with $10.49 yesterday.

Freezing Weather

WTI advanced 2.4 percent last week as stockpiles of distillate declined amid arctic weather in the U.S. that boosted demand for heating fuel. Inventories shrank by 4.6 million barrels last week, according to the EIA, the Energy Department’s statistical arm. They were forecast to fall 2.6 million in the Bloomberg survey.

Distillate demand increased 20 percent to 4.52 million barrels a day, the highest level since February 2008, the EIA said. Cold weather will dominate the central U.S. and Canada through mid-February, possibly broken up by a series of storms that may bring temperature swings, according to Matt Rogers, president of Commodity Weather Group LLC.

Brent Forecast

Crude inventories climbed by 6.4 million barrels last week, the EIA said. They were projected to rise by 2.25 million, according to a Bloomberg News survey.

ABN Amro raised its 2014 price forecast for Brent by 5.3 percent to $100 a barrel in a report today, citing instability in smaller oil-producing countries such as Syria and Egypt.

A Chinese Purchasing Managers’ Index fell to 49.5 from 50.5 in December, HSBC Holdings Plc and Markit Economics said in a statement. The reading compared with the median 49.6 estimate in a Bloomberg News survey of 14 economists. A number below 50 indicates contraction.

The Federal Open Market Committee said yesterday it will cut monthly bond purchases by $10 billion to $65 billion, citing labor-market indicators that “were mixed but on balance showed further improvement” and economic growth that has “picked up in recent quarters.”

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

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