WTI Oil Drops From 5-Week High on Supply as Brent Falls

West Texas Intermediate crude fell from a five-week high on forecasts that U.S. inventories increased last week. Brent slipped as Libya prepared to resume exports from its Hariga terminal.

WTI slid 0.3 percent. Supplies probably grew to the most since November, a Bloomberg survey showed before a government report tomorrow. A tanker with plans to load 1 million barrels of oil docked today at the formerly rebel-held oil port in eastern Libya, said Mohammed Elharari, a spokesman for state-run National Oil Corp. June Brent futures cost 62 cents more than May, the steepest front-month discount in more than 10 months.

“We are going to see another build in inventories,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The elements are in place for the price to go much lower. It looks like Libya is getting some oil out and it’s putting some downward pressure on oil.”

WTI for May delivery slipped 30 cents to settle at $103.75 a barrel on the New York Mercantile Exchange. The contract climbed to $104.05 yesterday, the highest close since March 3. It’s up 5.4 percent this year. The volume of all futures traded was 3.2 percent above the 100-day average at 4:42 p.m.

Futures pared losses after the American Petroleum Institute said crude inventories at Cushing, Oklahoma, the delivery point for WTI futures, decreased 640,000 barrels last week. Total crude supplies grew 7.64 million barrels. The May futures dropped 31 cents to $103.74 at 4:42 p.m. in electronic trading. Prices were $103.57 before the report was released at 4:30 p.m.

Brent Contango

Brent for May settlement decreased 33 cents, or 0.3 percent, to end the session at $108.74 a barrel on the London-based ICE Futures Europe exchange. The May contract expired today. The more-active June futures rose 29 cents to $109.36. The two contracts closest to expiration were at the widest contango since June 13. The volume of all futures was 1.5 percent above the 100-day average.

The Brent-WTI spread settled at $4.99, compared with $5.02 yesterday.

U.S. crude stockpiles probably expanded by 1.75 million barrels last week, the 12th gain in 13 weeks, the Bloomberg survey showed before an Energy Information Administration report tomorrow. Supplies increased to 384.1 million in the week ended April 4, the most since Nov. 29, the EIA, the Energy Department’s statistical arm, reported last week.

“The focus is on tomorrow’s EIA report,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “Crude inventories are high. A lot of money is exiting the market right now.”

Libya Production

The vessel Aegean Dignity, bound for Italy, will start loading oil at Hariga “either tonight or tomorrow morning,” and National Oil is expecting more tankers to arrive at the terminal, Elharari said.

National Oil on April 10 lifted force majeure restrictions on exports from the facility, one of four terminals seized last year by rebels seeking self-rule in the country’s east.

“We are getting more oil from Libya and it’s pushing prices down,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.

Output from the Organization of Petroleum Exporting Countries member fell to 250,000 barrels a day in March, down from 1.4 million a year earlier, Bloomberg estimates show.

June Brent futures rose on concern that tension between Ukraine and Russia, the world’s biggest energy exporter, will disrupt supplies.

Ukraine Unrest

Ukraine began a military-backed “anti-terrorist” operation in its eastern Donetsk region, where militants have seized buildings. Russian President Vladimir Putin said he’s being called on to intervene in the former Soviet republic.

The U.S. and European Union deliberated deepening sanctions against Russia for stoking unrest in eastern Ukraine.

“Prices are elevated due to geopolitical risks,” Kilduff said.

Implied volatility for at-the-money WTI options expiring in June was 17.2 percent, up from 16.9 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 474,770 contracts at 4:45 p.m. It totaled 589,097 contracts yesterday, 8.9 percent above the three-month average. Open interest was 1.67 million contracts.

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

To contact the editors responsible for this story: Bill Banker at bbanker@bloomberg.net Margot Habiby, Richard Stubbe

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