Prices advanced 0.7 percent. Stockpiles at the futures’ delivery point slid 1.08 million barrels last week, the Energy Information Administration said. Supplies have shrunk since TransCanada Corp. (TRP) said in January that it began using the southern leg of the Keystone XL pipeline to move oil to Texas from Cushing. Total crude stocks increased less than forecast.
“The Cushing drop is the result of that pipeline and this is a trend that’s going to continue,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “Momentum-wise, it’s still a positive market.”
WTI for April delivery advanced 76 cents to settle at $102.59 a barrel on the New York Mercantile Exchange. Prices are up 5.2 percent this month and 11 percent in the past year. The volume of all futures traded was 18 percent below the 100-day average at 2:57 p.m.
Brent for April settlement rose 1 cent to end the session at $109.52 a barrel on the London-based ICE Futures Europe exchange. Volume was near the 100-day average. The European benchmark was at a premium of $6.93 to WTI, the narrowest level since October. It was $7.68 yesterday.
Cushing stockpiles declined 7 million barrels in the four weeks ended Feb. 21 to 34.8 million, the least since Oct. 18, according to the EIA, the Energy Department’s statistical arm.
“Oil has potential to reclaim the $104 area based on today’s inventories,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago.
The Keystone link initially flowed at a rate of 288,000 barrels a day and will ramp up over the course of the year toward its 700,000-barrel capacity, according to TransCanada.
“The drawdown in Cushing is giving WTI a boost,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The spread between WTI and Brent continues to come in due to Cushing.”
U.S. crude supplies rose for a sixth time, up 68,000 barrels to 362.4 million, the EIA said. Analysts surveyed by Bloomberg had expected a gain of 1.28 million.
“The drop in Cushing is offset by the builds in the Gulf Coast,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.
Distillate fuels, including heating oil and diesel, increased 338,000 barrels, according to the EIA. Analysts estimated a drop of 1.25 million. Gasoline stockpiles fell 2.81 million barrels to 230.6 million. Demand for the fuel increased 6.3 percent.
“The jump in gasoline demand is going to catch a lot of people off guard,” Larry said. “Winter weather has not decreased gasoline demand.”
Total petroleum consumption dropped 2.3 percent to 18.3 million barrels a day last week, as demand for other oils, a category that includes liquefied petroleum gas, declined. Total fuel demand averaged over four weeks fell to 18.7 million barrels a day, the least since June.
“The market is a bit concerned on the overall demand side of the equation,” Cooper said.
Refineries boosted their operating rate 1.2 percentage points to 88 percent, the highest level since Jan. 24, the EIA said.
Crude also followed gains in U.S. stocks as purchases of new homes unexpectedly climbed to the highest level in more than five years. The Standard & Poor’s 500 Index advanced as much as 0.4 percent.
“The economy is looking pretty decent,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at Manulife Asset Management in Boston. Prices should be “north of $100 for the medium term.”
Implied volatility for at-the-money WTI options expiring in April was 16.9 percent, little changed from 17 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 372,713 contracts at 2:57 p.m. It totaled 388,665 contracts yesterday, 22 percent below the three-month average. Open interest was 1.64 million contracts.
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