West Texas Intermediate oil fell for the fourth time in five days after a government report showed U.S. inventories increased more than forecast last week.
Prices dropped 0.4 percent after the Energy Information Administration said supplies rose 3.83 million barrels, more than four times the 788,000-barrel median estimate in a Bloomberg survey of analysts. Refineries operated at the lowest rate in almost a year, reducing demand for crude to process into fuels. Venezuelan President Hugo Chavez died yesterday, and an election must be held within 30 days in OPEC’s fourth-biggest producer. WTI futures open interest rose to a record in New York yesterday for a third time.
“The inventory numbers showed a much bigger build and, fundamentally, we should go down,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “Chavez’s death didn’t really have an impact in the market but I do think we have to watch to see which kind of government does come out there.”
WTI for April delivery declined 39 cents to settle at $90.43 a barrel on the New York Mercantile Exchange. Futures dropped to as low as $89.55 a barrel after the inventory report was released at 10:30 a.m. in Washington. Prices have tumbled 14 percent in the past year. Volume was 1.7 percent above the 100-day average for the time of day at 4 p.m.
Brent for April settlement fell 55 cents, or 0.5 percent, to $111.06 a barrel on the London-based ICE Futures Europe exchange. Volume was 27 percent above the 100-day average.
Oil stockpiles rose to 381.4 million barrels in the week ended March 1, the most since June 29, the EIA, the Energy Department’s statistical arm, reported. Supplies at Cushing, Oklahoma, the delivery point for WTI, gained 257,000 barrels to 50.8 million.
Refinery utilization decreased 2.9 percentage points from the previous week to 82.2 percent, the lowest level since March 16, 2012. The operating rate was forecast to rise 0.4 percentage point in the Bloomberg survey of analysts.
Distillate supplies, which include heating oil and diesel, dropped 3.83 million barrels to 120.4 million, and gasoline inventories fell 616,000 barrels to 227.9 million. They were each forecast to slide 1 million barrels.
“There is a pretty big drop in refinery run rates,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Whenever we see refinery rates drop below 85 percent, usually we see draws in the products.”
Refinery units are often idled for maintenance in February and March as attention shifts away from heating oil and before gasoline consumption rises during the summer months.
Oil also fell as the euro weakened as much as 0.5 percent to $1.2983. A weaker euro and stronger dollar reduce oil’s appeal as an investment alternative.
“The dollar put pressure on oil today,” McGillian said.
Venezuela faces political infighting and the risk of unrest after the death of Chavez, whose personal brand of socialism left the region’s biggest oil exporter polarized and among the world’s most violent countries. The former paratrooper’s death yesterday, after 14 years in office, opens up a void, even after the cancer-stricken leader in December urged supporters to elect Vice President Nicolas Maduro to succeed him if he couldn’t fulfill a term that began Jan. 10.
U.S. crude imports from Venezuela, OPEC’s fourth-largest producer, totaled 549,000 barrels in the week ended Feb. 22, down 44 percent from a year earlier, EIA data showed. U.S. domestic output rose to as much as 7.12 million barrels a day in February, the most since 1992. U.S. output slipped to 7.09 million barrels a day last week, the EIA reported.
“U.S. production is big enough to absorb whatever losses may come from Venezuela,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “You may see some unrest, and it will probably have some adverse effects on oil production. For the most part it should be a short-term bullish factor.”
Venezuela pumped 2.38 million barrels of oil a day in January, the Organization of Petroleum Exporting Countries said in a monthly report Feb. 12, citing secondary sources. That put the country sixth in the group in terms of production, behind Saudi Arabia, Iraq, Kuwait, Iran and the United Arab Emirates.
Venezuela produced as much as 3.52 million barrels a day of oil in 1997, according to the EIA. Output has declined since Chavez became president in 1999, falling to as low as 2.38 million in 2010.
Electronic trading volume on the Nymex was 483,715 contracts as of 4 p.m. It totaled 483,681 contracts yesterday, 9.8 percent below the three-month average. Open interest was a record 1.71 million contracts.