WTI Crude Caps Monthly Gain on Cushing Supply

West Texas Intermediate crude capped a monthly gain as inventories at Cushing, Oklahoma, dropped and the euro strengthened against the dollar. Brent advanced.

WTI closed above $100 for a 12th day. Stockpiles at the futures’ delivery point slid 7.04 million barrels in the four weeks ended Feb. 21 as the southern leg of TransCanada Corp. (TRP)’s Keystone XL pipeline moved oil to Texas from the hub. The euro surged to a 2014 high against the dollar. Brent’s increase in February was the biggest since August.

“Crude prices have reached a lofty plateau and I don’t see them weakening,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “There is no reason for Cushing inventories to build in the near term. The dollar looks very bad against the euro and that supports the prospect for stronger crude prices.”

WTI for April delivery climbed 19 cents to settle at $102.59 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 31 percent below the 100-day average at 3:26 p.m. Prices increased 5.2 percent this month.

Brent for April settlement advanced 11 cents to $109.07 a barrel on the London-based ICE Futures Europe exchange. Volume was 5.8 percent below the 100-day average. The European crude was at a $6.48 premium to WTI, the narrowest since October.

Cushing Inventories

Cushing stockpiles decreased to 34.8 million last week, the least since Oct. 18, the Energy Information Administration, the Energy Department’s statistical arm, reported Feb. 26. Supplies have shrunk since TransCanada said in January that it began operating the Keystone XL link at a rate of 288,000 barrels a day. The company plans to ramp it up over the course of the year to its capacity of 700,000 barrels a day.

“We should have smaller Cushing inventories and it should be bullish for WTI,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

U.S. crude supplies and inventories in states along the Gulf Coast, a region known as PADD 3, both increased for a sixth week. Total stockpiles grew 68,000 barrels last week to 362.4 million. Supplies in PADD 3 went up 1.55 million barrels to 177.7 million. Oklahoma is in PADD 2, the Midwestern region.

“We are seeing a transfer of crude to the Gulf,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.

The euro surged as much as 0.8 percent to $1.3825 as inflation in the 18-nation currency bloc exceeded analyst estimates, damping speculation the European Central Bank will add to stimulus next week. A strong euro and weaker dollar increase crude’s investment appeal.

Stronger Euro

“The euro is probably giving crude support,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

The S&P 500 climbed as much as 0.7 percent to an intraday record amid speculation that the Federal Reserve will continue to support the economy after U.S. gross domestic product expanded at a slower pace in the fourth quarter than previously estimated. Equities retreated later in the day as technology shares turned lower.

GDP grew at a 2.4 percent annualized rate, compared with a 3.2 percent gain reported last month, revised figures from the Commerce Department show. The U.S. will use 18.9 million barrels a day of oil this year, according to the Energy Information Administration.

Cold Weather

“WTI is going to trade between $100 and $104 until we see proof of strong economic growth,” McGillian said.

WTI has also gained this month as cold weather boosted demand for heating oil and cut inventories of distillate fuel.

There’s at least a 30 percent chance for 8 inches (20 centimeters) of snow in New York from late March 2 into March 3, the National Weather Service said. About a quarter of households in the Northeast use heating oil to warm their homes.

Distillate inventories, including heating oil and diesel, fell to 112.7 million barrels in the week ended Feb. 14, the least since November, according to the EIA. They rose 0.3 percent last week to 113.1 million.

Implied volatility for at-the-money WTI options expiring in April was 17 percent, down from 17.4 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 315,897 contracts at 3:27 p.m. It totaled 433,976 contracts yesterday, 13 percent below the three-month average. Open interest was 1.66 million contracts, the most since Nov. 14.

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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