West Texas Intermediate crude fell the most in three weeks on projections that U.S. supplies rose and concern that the weakening Chinese yuan will hurt growth in the second-biggest oil-consuming country. Brent also dropped.
Futures in New York tumbled 1 percent. U.S. crude inventories increased for a sixth week to 363.6 million barrels, according to a Bloomberg survey of analysts before an Energy Information Administration report tomorrow. China’s yuan slid for a sixth day, ending below the central bank’s reference rate for the first time since September 2012.
“Crude inventories should continue to build in coming weeks,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The market is also reacting to some increased nervousness about the economy.”
WTI for April delivery decreased 99 cents to settle at $101.83 a barrel on the New York Mercantile Exchange. It was the biggest decline since Feb. 3. The volume of all futures traded was 23 percent below the 100-day average at 4:38 p.m. Futures are up 3.5 percent this year.
Prices were little changed from the settlement after the American Petroleum Institute reported supplies rose 822,000 barrels last week. WTI was down 79 cents, or 0.8 percent, at 4:48 p.m. to $102.03 a barrel in electronic trading. It was $102 before the report was released at 4:30 p.m.
Brent for April settlement declined $1.13, or 1 percent, to end the session at $109.51 a barrel on the London-based ICE Futures Europe exchange. Trading was 9.2 percent higher than the 100-day average.
The European benchmark settled at a $7.68 premium to WTI. The spread closed at $7.82 yesterday.
Crude stockpiles in the U.S., the world’s biggest oil user, increased by 1.28 million barrels last week, according to the median of 10 responses in a Bloomberg survey of analysts. Inventories of distillate fuel, a category that includes heating oil and diesel, probably fell by 1.25 million barrels, according to the survey.
The opening of the southern link of TransCanada Corp.’s (TRP) Keystone XL pipeline in January eased a bottleneck in the central U.S. Supplies at Cushing, Oklahoma, the delivery point for WTI futures, fell 1.73 million barrels to 35.9 million in the week ended Feb. 14, the least since October, according to the EIA. Stockpiles along the Gulf of Mexico, known as PADD 3, rose 2.51 million to 176.1 million barrels over the same period.
“The crude market is under storage pressure,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “We’re expecting tomorrow’s report to show another build nationwide. Supplies will probably fall at Cushing, while barrels are pushed into PADD 3.”
The yuan tumbled the most in more than three years against the dollar. China’s central bank is draining funds from the financial system as lower money-market rates signal ample supplies of the currency amid a government drive to clean up risky lending practices. China’s Shanghai Composite Index dropped the most in five months.
Oil’s drop accelerated on signals that U.S. economic growth may slow. The Conference Board’s index of consumer confidence fell to 78.1 in February from 79.4 the prior month, the New York-based private research group said today. The S&P/Case-Shiller index of property prices in 20 cities climbed 13.4 percent from December 2012 after a 13.7 percent gain in the year ended in November, the group said today in New York.
WTI has settled above $100 a barrel for 10 of the past 11 days and closed at a four-month high of $103.31 on Feb. 19.
“Today’s activity in the market is more of a pause than any change in overall sentiment,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $110 billion of assets. “The economy still looks good. The year-on-year gains in housing prices aren’t as big as in the last quarter but we’re still seeing positive, steady growth.”
WTI’s 14-day relative strength index is at about 62 today after climbing to a seven-month high of 74 on Feb. 20, according to data compiled by Bloomberg. A reading above 70 shows the market is overbought.
Natural gas tumbled for a second day on speculation that milder U.S. weather may curb demand for the fuel. Manufacturers and utilities switch between natural gas and crude-based fuels depending on cost. Futures yesterday surged to $6.493, the highest intraday price since Dec. 2, 2008, before closing 11 percent lower in the biggest one-day drop in six years.
“The break in natural gas yesterday is a warning to all the energy markets,” Yawger said. “The big run-up in prices appears to have come to an end.”
Natural gas for March delivery dropped 34.9 cents, or 6.4 percent, to settle at $5.096 per million British thermal units in New York. Volume was 31 percent above the 100-day average.
Citigroup Inc. (C) raised its forecast for Brent crude in 2014 to $103 a barrel, from $93 previously, because of “tighter-than-expected global supply-demand balances and increasing pessimism over incremental supplies from Iran and Libya,” London-based analyst Seth Kleinman wrote in a report. Iranian output has been curbed by sanctions and Libyan exports by protests at terminals.
“Once you look outside the U.S., the supply picture isn’t so healthy,” Haworth said.
Implied volatility for at-the-money WTI options expiring in April was 16.8 percent, up from 16.6 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 361,629 contracts at 4:38 p.m. It totaled 370,732 contracts yesterday, the lowest level since Jan. 31 and 26 percent below the three-month average. Open interest was 1.64 million contracts.
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