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WTI Drops From Three-Week High as Stockpiles Gain

West Texas Intermediate slid from a three-week high after government data showed U.S. crude inventories expanded as production increased to a 28-year peak. Brent rose in London after the International Energy Agency raised its demand estimate for OPEC crude.

Futures fell as much as 0.6 percent in New York, the first drop in four days. Crude stockpiles rose to a near-record last week as output climbed to the most since 1986, the Energy Information Administration reported yesterday. Demand for OPEC’s crude will be higher in the second half of the year than previously estimated following stronger-than-expected fuel use in developed nations, according to the Paris-based IEA.

“The latest EIA data showed crude stocks building counter-seasonally, increasing the overhang,” Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London, said in a report. “This was a result of refinery runs falling for the fourth straight week. We expect U.S. production to remain on its robust growth path.”

WTI for June delivery declined as much as 63 cents to $101.74 a barrel in electronic trading on the New York Mercantile Exchange and was at $102.09 at 1:21 p.m. London time. The contract climbed 67 cents to $102.37 yesterday, the highest close since April 21. The volume of all futures traded was about 49 percent above the 100-day average for the time of day. Prices are up 3.7 percent this year.

Brent for June settlement, which expires today, was 30 cents higher at $110.49 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $8.52 to WTI on ICE. The July contract was up 10 cents at $109.41.

Oil Supplies

The Organization of Petroleum Exporting Countries will need to provide an average of 30.7 million barrels a day in the second half, or 800,000 a day more than it pumped last month, the IEA said today.

“While OPEC has more than enough capacity to deliver, it remains to be seen whether it will manage to overcome the above-ground hurdles that have plagued some of its member countries lately,” the adviser to 29 nations said.

WTI rebounded last week after the EIA said crude inventories slid from 399.4 million barrels, the most since weekly reports were published in 1982. Stockpiles expanded by 947,000 barrels to 398.5 million in the seven days ended May 9, the EIA, the Energy Department’s statistical arm, said yesterday.

U.S. Gasoline

U.S. production increased by 78,000 barrels a day to 8.428 million, the EIA said. A combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies from shale formations in the central U.S., including the Bakken in North Dakota and the Eagle Ford in Texas.

Gasoline supplies fell by 772,000 barrels last week to 212.4 million, the EIA reported. Distillate inventories, including heating oil and diesel, dropped by 1.12 million to 112.9 million.

Stockpiles at Cushing, Oklahoma, the delivery point for WTI, shrank by 592,000 barrels to 23.4 million, according to the EIA. That’s the lowest level since December 2008. Supplies at the largest U.S. oil-storage hub have decreased since the southern portion of the Keystone XL pipeline began moving oil in January from the U.S. Midwest to the Gulf Coast.

In Ukraine, pro-Russian separatist groups were excluded from national unity talks that started in Kiev with the aim of easing tension before the May 25 presidential vote. It would be “ridiculous” for the U.S. and European Union to hold Russia accountable if the election is disrupted, according to the country’s Foreign Minister Sergei Lavrov.

“In the east and south of Ukraine, there is a war, a real war, with heavy weaponry used, and if this is something that is conducive to free and fair elections, then I don’t understand something about freedom,” he said in a Bloomberg Television interview in Moscow yesterday.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net James Herron, Randall Hackley

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