WTI, Brent Crudes Erase Gains on Emerging Market Concern

West Texas Intermediate reversed earlier gains on concern demand in emerging markets may slow after a Chinese state-owned newspaper said some banks curbed loans to developers in the world’s second-biggest oil user.

WTI futures traded near their lowest closing level in a week in New York, after erasing an earlier gain of 0.5 percent. Brent futures reversed an increase of 0.4 percent in London.

Industrial Bank Co. and other unidentified lenders have curbed loans to the property sector and related industries such as steel and cement, Shanghai Securities News reported. Prices advanced earlier on forecasts that arctic air will return to the U.S. Northeast and Midwest this week, bolstering demand for heating fuel in the world’s largest oil consumer.

“Risk appetite remains limited,” said Myrto Sokou, senior analyst at Sucden Financial Ltd. London. “Investors remain cautious regarding the prospects of the emerging markets.”

WTI for April delivery traded 9 cents lower at $102.11 a barrel in electronic trading on the New York Mercantile Exchange at 1:08 p.m. London time, having earlier climbed to $102.70. The contract dropped to $102.20 on Feb. 21, the lowest close since Feb. 14. The volume of all futures traded was about 24 percent below the 100-day average. Prices are up 3.8 percent this year.

Brent for April settlement slipped as much as 35 cents, or 0.3 percent, to $109.50 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $7.55 to WTI, according to contracts traded on ICE. The spread closed at $7.65 on Feb. 21, widening for the first time in a week.

China Lending

China’s central bank singled out property developers this month as one of three types of borrowers most at risk as authorities seek to tame debt that the Chinese Academy of Social Sciences estimates at 215 percent of gross domestic product. The country’s benchmark stock index fell to its biggest loss in seven weeks today amid speculation that reduced lending to the real estate industry will curb growth in the world’s second-largest economy.

WTI advanced the past six weeks, the longest rising streak in a year, as crude inventories at Cushing, Oklahoma, shrank and cold weather bolstered fuel demand. Another blast of freezing air is forecast for the central and eastern U.S. this week as two storms threaten to bring snow to the Northeast, according to the National Weather Service.

Crude stockpiles at Cushing, the delivery point for WTI contracts, fell to their lowest level since October in the seven days through Feb. 14, government data show.

Cushing Infrastructure

“Simply put, there is now more going out of Cushing than there is coming in,” said Guy Wolf, global head of market analytics at Marex Spectron Group in London, said by e-mail. “A lot of supply infrastructure was contracted to ship crude out of Cushing to other, higher-priced areas. It is still economic to do so as WTI still trades at a discount.”

The opening of the southern portion of TransCanada Corp.’s Keystone XL pipeline in January is easing a supply bottleneck in the central U.S. Stockpiles at Cushing declined by 1.73 million barrels to 35.9 million in the period ended Feb. 14, the Energy Information Administration reported last week. Crude inventories nationwide expanded by 973,000 barrels to 362.3 million.

Money managers increased bullish bets on WTI for the fifth time in six weeks, the Commodity Futures Trading Commission said. Hedge funds and other large speculators raised wagers on higher WTI prices by 25,836 futures and options combined, an 8.4 percent increase to 331,857 in the week ended Feb. 18, the CFTC said in its weekly report on Feb. 21. That’s the highest level since July last year.

Money managers raised net-long positions on Brent crude to the highest level in seven weeks, according to data from ICE Futures Europe. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 121,707 lots in the week ended Feb. 18, the London-based exchange said today.

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; 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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