WTI Rises a Second Day as U.S. Freeze Seen Curbing Supply

West Texas Intermediate crude rose for a second day following speculation a U.S. government report will show distillate inventories fell amid colder weather in the country, the world’s biggest oil consumer.

Futures climbed as much as 1.1 percent in New York. Distillate supplies, including heating oil and diesel, probably shrank by 2.5 million barrels to 113.7 million last week, according to a Bloomberg News survey before data from the Energy Information Administration today. An industry report yesterday showed stockpiles dropped 1.46 million. A second winter storm this week is moving into the U.S. Northeast. Brent crude’s premium to WTI dropped below $8 a barrel.

“The U.S. winter is keeping levels high because of the increase in demand,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said by phone. “There are still some very chilly places. Once we get the winter behind us I’m looking for prices to drift lower as milder weather approaches.”

WTI for March delivery increased as much as $1.07 to $98.26 a barrel in electronic trading on the New York Mercantile Exchange and was at $97.95 as of 1:50 p.m. London time. The contract gained 0.8 percent to $97.19 yesterday, halting a two-day loss. The volume of all futures traded was about 16 percent below the 100-day average.

Brent for March settlement advanced as much as 66 cents, or 0.6 percent, to $106.44 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude’s premium to WTI on the ICE exchange narrowed to as little as $7.99 a barrel, slipping below $8 for the first time since Oct. 10.

Winter Storm

WTI has risen the past three weeks as distillate demand expanded and inventories decreased amid arctic weather. Snow spreading over the central U.S. will be followed by freezing rain and sleet today, according to Tom Kline, a meteorologist at AccuWeather Inc.

MDA Weather Services in Gaithersburg, Maryland, predicted below-normal temperatures in most of the lower-48 states through Feb. 13. A winter storm will continue to move east with heavy snow forecast from central Kansas to the Northeast and ice accumulation possible from Arkansas into the Ohio River Valley, said the National Weather Service.

Distillate Demand

“Distillate demand is likely to have remained healthy, supported by the run of frigid weather conditions in the U.S.,” said Mark Pervan, the head of commodity research at Australia & New Zealand Banking Group Ltd. “Expectations are for a further fall in distillate inventories.”

U.S. gasoline inventories slid by 1.18 million barrels in the seven days ended Jan. 31, the industry-funded American Petroleum Institute said in Washington yesterday. Supplies probably climbed by 1.15 million, according to the median estimate of 10 analysts surveyed by Bloomberg before today’s report from the EIA, the Energy Department’s statistical arm.

Crude stockpiles increased by 384,000 barrels last week, the API data show, compared with a projected gain of 2.55 million in the survey.

WTI’s rise may stall along its 100-day moving average, according to data compiled by Bloomberg. Futures have halted advances the past four days near this indicator, at about $98 a barrel. Sell orders tend to be clustered around technical-resistance levels.

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

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net

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