WTI Oil Falls Most in Three Months on Supply Outlook

West Texas Intermediate oil dropped the most in more than three months, widening the discount to Brent, on projections that a government report tomorrow will show that U.S. crude stockpiles climbed last week.

WTI fell 2.1 percent. Crude supplies increased for the 13th time in 14 weeks, to 397.1 million barrels, a Bloomberg survey showed before tomorrow’s Energy Information Administration report. Brent fell less than WTI after Vice President Joe Biden expressed U.S. support for Ukraine during a visit to the capital Kiev, as an agreement with Russia to ease tension in the former Soviet republic’s east showed weakness.

“The market is moving lower on expectations that we’ll get another supply build in tomorrow’s report,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “Inventories are getting close to 400 million barrels, which is very bearish for the market.”

WTI for May delivery, which expired today, slid $2.24 to settle at $102.13 a barrel on the New York Mercantile Exchange, capping the biggest drop since Jan. 2. The more-active June contract fell $1.90, or 1.8 percent, to $101.75. May’s premium to June closed at 38 cents, the smallest settlement this year for those two contracts. Trading was 35 percent above the 100-day average at 4:37 p.m.

Prices were little changed from the settlement after the American Petroleum Institute said U.S. crude inventories rose 519,000 barrels last week. June WTI traded at $101.84 at 4:36 p.m. in electronic trading, compared with $101.80 before the report was released at 4:30 p.m.

Brent Futures

Brent for June settlement decreased 68 cents, or 0.6 percent, to end the session at $109.27 a barrel on the London-based ICE Futures Europe exchange. Trading was 12 percent below average. WTI settled at a $7.52 discount to Brent, up from $6.30 at yesterday’s close.

U.S. crude inventories increased 3 million barrels last week, according to the Bloomberg survey. Supplies grew to 394.1 million in the week ended April 11, the highest level since June 2013, the EIA, the Energy Department’s statistical arm, said last week. Production climbed to 8.3 million barrels a day in the period, the most since April 1988.

Crude supplies at Cushing, Oklahoma, the delivery point for WTI, fell 771,000 barrels in the week ended April 11 to 26.8 million, the least since October 2009, the EIA said April 16.

“One of the real bullish factors in the market was that May-June could spike and now May-June is under pressure,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “The expectations were really strong going into expiry because of low supplies at Cushing.”

Gulf Coast

Cushing stockpiles have fallen since the southern leg of the Keystone XL pipeline began moving oil to the Gulf of Mexico from the hub in January. Inventories along the Gulf Coast, known as PADD 3, rose 5.17 million barrels to 207.2 million, the most in EIA data going back to 1990.

“Supply drops at Cushing have trumped the big builds nationwide in recent months, but that may be about to change,” Yawger said. “There’s a realization that supplies have just moved to the Gulf Coast, where they are now at a record high.”

With the April 17 accord fraying, U.S. Secretary of State John Kerry warned Russian Foreign Minister Sergei Lavrov yesterday that “there will be consequences” if Russia doesn’t act “over the next pivotal days” to restrain separatist activists in Ukraine, spokeswoman Jen Psaki said in Washington. Lavrov called on the U.S. to hold Ukraine’s government accountable for not reining in what Russia portrays as right-wing militias.

Watching Ukraine

“Bulls have been latching onto Ukraine to drive prices higher,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Rising inventories are pointing to more-than-ample supplies in the U.S. and are basically providing resistance to the market. We haven’t seen a significant increase in demand.”

Implied volatility for at-the-money WTI options expiring in June was 17.3 percent, up from 16.5 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 623,293 contracts at 4:38 p.m. It totaled 424,034 contracts yesterday, 21 percent below the three-month average. Open interest was 1.65 million contracts.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

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

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