WTI Crude Holds Above $100 on U.S. Consumer Confidence

West Texas Intermediate crude settled above $100 for a fourth day this week on better-than-expected U.S. consumer confidence.

Prices gained 0.4 percent since Feb. 7, capping the longest stretch of weekly increases in more than a year. The Thomson Reuters/University of Michigan preliminary index of sentiment held at 81.2 this month, and supplies at Cushing, Oklahoma, the delivery point for New York futures, slid to a three-month low. WTI was lower for most of the day after the Federal Reserve said factory production dropped the most since May 2009 in January.

“The economic news is not really bad,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “You are getting some pretty strong support around $100. We’ve seen such a reduction in Cushing inventories.”

WTI for March delivery dropped 5 cents to settle at $100.30 a barrel on the New York Mercantile Exchange. Prices climbed to a four-month high of $100.37 on Feb. 12. Volume was 5.5 percent above the 100-day average at 3:29 p.m.

Nymex floor trading will be closed Feb. 17 for the U.S. Presidents Day holiday.

Brent for April settlement gained 56 cents, or 0.5 percent, to end the session at $109.08 a barrel on the ICE Futures Europe exchange. Volume was 33 percent below 100-day average. The European benchmark crude was at premium of $8.95 a barrel to WTI for the same month. The spread settled at $8.38 yesterday, based on March prices.

Consumer Confidence

The consumer confidence index was higher than the median estimate of 80.2 in a Bloomberg survey of economists. The Michigan sentiment survey’s index of expectations six months from now increased to 73 from 71.2 last month.

WTI followed gains in U.S. stocks as the Standard & Poor’s 500 Index climbed as much as 0.7 percent.

Factory production decreased 0.8 percent in January, according to the Federal Reserve. The median forecast in a Bloomberg survey of economists called for a 0.1 percent advance for January. Assembly lines slowed last month as colder weather tempered production, the Fed said.

Supplies at Cushing, the delivery point for the futures, shrank by 2.67 million barrels last week, to 37.6 million barrels, the lowest level since Nov. 1, the Energy Information Administration reported Feb. 12.

Keystone XL

Stockpiles declined as the southern leg of TransCanada Corp.’s (TRP) Keystone XL pipeline moved oil to the Gulf Coast. WTI reduced gains as total U.S. crude supplies rose more than expected.

“People are focusing on Cushing due to the Keystone pipeline,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “Cushing inventories are likely to continue to fall.”

U.S. stockpiles of crude oil climbed by 3.27 million barrels last week to 361.4 million, the EIA, the Energy Department’s statistical arm. Inventories along the Gulf Coast, known as PADD 3, climbed 3.83 million barrels.

“People looked at the big withdrawal in Cushing and said, ‘wow, that’s tremendous’ and missed the big build in PADD 3,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

Petroleum demand slid 569,000 barrels a day to 18.5 million last week, according to the EIA. Crude supplies have climbed 11.1 million barrels in the past four weeks.

Fundamental Signs

“We need to see signs of fundamentals really tightening for oil to continue the rally,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

About 62 percent of analysts surveyed by Bloomberg predicted that futures will move lower through Feb. 21 amid rising stockpiles.

A snow storm that hit the Eastern U.S. this week knocked out power to hundreds of thousands of homes and businesses, snarled traffic and canceled more than 14,000 flights. About 25 percent of Northeast households use heating oil to warm their homes, EIA data show.

Ultra low sulfur diesel, a proxy for heating oil, climbed 1.6 percent on the Nymex to $3.0782 a gallon.

Temperatures will be higher than average in the eastern two-thirds of the U.S. from Feb. 19 through Feb. 23, according to MDA Weather Services.

“The weather has been a bullish factor for crude,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “The weather is going to warm up.”

Implied volatility for at-the-money WTI options expiring in April was 15.9 percent, down from 17.1 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 488,406 contracts at 3:08 p.m. It totaled 551,190 contracts yesterday, 8.1 percent above the three-month average. Open interest was 1.65 million contracts.

To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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