West Texas Intermediate crude fell to the lowest level in two weeks, widening the discount to Brent, as U.S. equities slipped and oil stockpiles expanded.
Prices dropped 1.3 percent, following the Standard & Poor’s 500 Index (SPX) amid disappointing corporate earnings. WTI capped the first weekly loss since April 4 as inventories reached the highest level since government weekly data started in 1982. Brent fell less than WTI on concern the Ukraine crisis will escalate and disrupt supplies.
“I don’t see anything physical or fundamental that’s bullish for oil,” Kyle Cooper, director of commodities research at IAF Advisors in Houston, said today in a telephone interview. “Equities are falling. The petroleum market is driven by short-term money flows. We probably will test $100.”
WTI for June delivery fell $1.34 to $100.60 a barrel on the New York Mercantile Exchange, the lowest settlement since April 7. The futures are down 3.6 percent this week. The volume of all futures traded was 19 percent below the 100-day average for the time of day.
Brent for June settlement slid 75 cents, or 0.7 percent, to $109.58 a barrel on the London-based ICE Futures Europe exchange. Trading was 2.3 percent above the 100-day average. WTI’s discount to the European benchmark crude expanded to $8.98 a barrel from $8.39 yesterday.
The S&P 500 dropped as much as 1 percent as results from Amazon.com Inc. to Visa Inc. disappointed. Nine of the index’s 10 main industries retreated.
“The stock market being lower is adding additional pressure to oil,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “Oil is refocusing on the high supplies in the U.S.”
WTI has dropped more than $4 since surging to an intraday high of $104.99 on April 16.
Crude stockpiles grew 3.52 million barrels in the seven days ended April 18 to 397.7 million, the Energy Information Administration, the Energy Department’s statistical arm, reported on April 23. It’s the most since May 1931, according the weekly EIA records and previous data kept monthly beginning in 1920. U.S. crude production increased to 8.36 million barrels a day, the most since 1988.
WTI’s discount to Brent widened by $3.75 this week on signs of the escalating crisis in Ukraine. President Barack Obama was set to discuss a possible expansion of sanctions with European leaders after U.S. Secretary of State John Kerry said Russia is running out of time to ease tension.
“WTI is retreating because of the massive inventories in the U.S.,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “There is no increase in fuel demand and the fundamental picture is weak. The Brent-WTI spread is widening due to Ukraine.”
Total oil demand dropped 361,000 barrels a day last week to 18.1 million, the lowest level since June 7. Inventories have increased for 13 out of the past 14 weeks.
“A lot of people are anticipating more big builds in crude inventories,” Carl Larry, president of Oil Outlooks & Opinions LLC in Houston, said today by telephone. “Ukraine still seems to be a hot topic and could get even more tense over the weekend. That’ll help Brent.”
Obama, who’s visiting South Korea, planned a conference call with leaders including German Chancellor Angela Merkel. In Washington yesterday, Kerry accused Russian President Vladimir Putin’s government, which began new military exercises on Ukraine’s border, of using the “barrel of a gun and the force of a mob” to impose its will on its neighbor.
Implied volatility for at-the-money WTI options expiring in June was 17 percent, up from 16.8 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 365,105 contracts at 2:45 p.m. It totaled 431,085 contracts yesterday, 20 percent below the three-month average. Open interest was 1.64 million contracts.
To contact the reporter on this story: Moming Zhou in New York at firstname.lastname@example.org
To contact the editors responsible for this story: Dan Stets at email@example.com Richard Stubbe