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WTI Crude Trades Near Four-Month Low Before Supply Data

April 17 (Bloomberg) -- West Texas Intermediate fell for the fourth time in five days, trading near the lowest level in almost four months before government data forecast to show U.S. crude inventories rose last week.

WTI dropped as much as 1.7 percent. An Energy Department report today may show crude supplies rose 1.2 million barrels to the highest level in 22 years, according to a Bloomberg survey. That’s contrary to a report yesterday from the American Petroleum Institute, which showed stockpiles slid 6.7 million barrels last week, the most since the seven days ended Dec. 28.

“The oil market is looking quite weak and there’s a comfortable supply-demand situation in the short term,” said Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich, who predicts the European benchmark, Brent, may tumble to $80 a barrel in the first half. “The fundamental reason for the bearish situation is the cautious outlook worldwide.”

WTI for May delivery declined as much as $1.50 to $87.22 a barrel, and was at $87.27 in electronic trading on the New York Mercantile Exchange at 1:03 p.m. London time. The volume of all futures traded was 47 percent above the 100-day average. The contract closed at $88.71 on April 15, the lowest since Dec. 24. Prices are down 4.8 percent this year.

Brent for June settlement slipped $1.15 cents to $98.76 a barrel on the London-based ICE Futures Europe exchange. The contract fell to $99.91 yesterday, the lowest close since July 10. The front-month contract’s premium to WTI shrank to as little as $10.53, the narrowest since April 12.

Bollinger Band

WTI settled below the 30-day lower Bollinger Band for a second day yesterday, signaling the market is oversold, according to data compiled by Bloomberg. WTI also rebounded in early March after dropping below this band. The indicator, at around $88.63 today, presents technical support, a level where buy orders may be clustered.

BNP Paribas SA cut its 2013 forecasts for Brent and WTI to reflect the price drop in the first quarter. The bank trimmed its Brent estimate to $108 a barrel from $115 and WTI to $95 from $100. Prices will recover in the second half, supported by “loose” global monetary policy and political threats to supply, Harry Tchilinguirian, head of commodity markets strategy, said in an e-mailed report.

Buying Opportunity

Crude’s weakness is temporary and investors should treat this week’s decline as a buying opportunity, while users should take advantage of the drop to hedge at least part of their requirements, Michael Wittner, the head of oil-market research at Societe Generale SA in New York, said in a report e-mailed today. He reiterated his forecast for Brent to trade at $112 to $113 a barrel in the second half of 2013.

“Brent below $100 a barrel is something you can consider buying,” said Dominic Schnider, head of commodities research at UBS AG’s wealth-management unit in Singapore. “We expect demand to pick up over the second half of 2013. There’s great value for Brent at $90-$95, and a strong buy at these levels.”

U.S. gasoline supplies rose 253,000 barrels last week, the industry-funded API said. They are forecast to slip 800,000 barrels in the Energy Information Administration report due at 10:30 a.m. Washington time, according to the median estimate of 11 analysts in the Bloomberg News survey.

Distillate inventories, a category that includes heating oil and diesel, climbed 1.3 million barrels in the API data. They are projected to drop 350,000 barrels in the EIA report.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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