West Texas Intermediate oil was little changed as an Energy Information Administration report showed supplies dropped at Cushing, Oklahoma, the biggest U.S. storage hub and delivery point for the New York-traded crude.
Futures slipped 2 cents after stockpiles declined 315,000 barrels last week at Cushing to 51.4 million, a one-month low. Nationwide inventories gained 2.62 million barrels to 371.7 million. WTI’s discount to Brent oil widened to the most this year on concern that flow limits on the Seaway pipeline would bolster a glut at Cushing.
“It looks like a lot of buyers are using railcars to avoid the bottleneck at Cushing,” said Richard Soultanian, co-president of NUS Consulting Group, a Park Ridge, New Jersey-based energy procurement adviser. “Anyone that can avoid Cushing is going to.”
Crude oil for March delivery settled at $96.62 a barrel on the New York Mercantile Exchange. It touched a two-week low of $95.04 in intraday trading. Volume was 57 percent above the 100-day average at 3:20 p.m. Futures are up 5.2 percent this year.
Brent oil for March settlement climbed 21 cents to end the session at $116.73 a barrel on the London-based ICE Futures Europe exchange. Volume was 28 percent above the 100-day average.
The European benchmark grade traded at as much as a $20.11-a-barrel premium to WTI, the widest spread since Dec. 24, based on settlement prices. The gap has grown since Enterprise Products Partners LP said Jan. 31 that capacity on the Seaway pipeline to the Gulf Coast from Cushing will be limited until late 2013.
Increasing output in the U.S. and Canada and the lack of pipeline capacity bolstered stockpiles at Cushing to a record 51.9 million barrels in the week ended Jan. 11.
“U.S. inventories are extremely robust,” said Adam Wise, who helps manage a $6 billion oil and gas bond portfolio as a managing director at Manulife Asset Management in Boston.
PBF Energy Inc. said on Feb. 4 that it expects to receive its first rail shipment from North Dakota at its Delaware refinery. PBF finished construction on the second train-unloading terminal at its 182,800-barrel-a-day Delaware City refinery, the company said in a statement. PBF plans to unload its first unit train of Bakken oil this week, with 17 more scheduled to arrive in the next two weeks.
The oil-supply gain left U.S. stockpiles at the highest level since the week ended Dec. 7, the report from the EIA, the Energy Department’s statistical arm, showed. Crude production advanced 4,000 barrels a day to 7 million in the week ended Feb. 1. Imports dropped 499,000 barrels a day to 7.57 million last week, the second-lowest level in the past year.
“WTI should continue to trade at a discount to Brent for a while because we’re producing a heck of a lot more oil here, global demand is rising and we’re using less in the U.S.,” Soultanian said.
TransCanada Corp. Chief Executive Officer Russ Girling expects approval “very soon” for the $5.3 billion portion of the Keystone XL oil pipeline that crosses the U.S.-Canada border. Keystone XL would deliver 830,000 barrels a day from Canada and North Dakota shale fields to the Gulf Coast.
Magellan Midstream Partners LP expects its reversed Longhorn pipeline to begin moving 75,000 barrels of crude a day in the first quarter or early in the second quarter to Houston-area refiners from western Texas, the company said Feb. 4. That’s scheduled to increase to 225,000 by mid-2013.
“The spread between WTI and Brent should widen until we get additional pipeline capacity later this year,” Wise said. “Pipelines won’t have a material impact on the supply situation for a while. The Seaway pipeline won’t be up to full capacity for months, Magellan’s Longhorn will be up to 225,000 barrels a day during the second half of the year and the Keystone should be running by year’s end.”
The U.S. will tighten sanctions on Iran today with measures blocking the exporter from repatriating oil payments in dollars, euros and other hard currencies. The new restrictions are aimed at stopping that country’s nuclear program.
Crude buyers such as China, Japan and India must use their own currencies to pay Iran and keep the payments in escrow accounts, or else risk expulsion from the U.S. banking system. Iran will be able to use the funds only for locally sourced goods and services, in what will amount to barter arrangements.
WTI’s rebound in New York stalled yesterday along the bottom of an uptrend channel that was breached the previous day, signaling technical resistance, where sell orders may be clustered. This indicator is around $97.50 a barrel today, according to data compiled by Bloomberg.
Electronic trading volume on the Nymex was 714,785 contracts as of 3:20 p.m. It totaled 578,766 contracts yesterday, 13 percent above the three-month average. Open interest was 1.6 million, the highest level since Nov. 12.