West Texas Intermediate crude fell for the first time in four days before government data that may show U.S. stockpiles rose last week from an 82-year high.
Futures decreased 0.6 percent as supplies climbed by 2 million barrels in a Bloomberg survey ahead of an Energy Information Administration report tomorrow that may also show higher production and weaker demand. The U.S. cut its 2013 price forecasts for both WTI and Brent crude in the EIA’s Short-Term Energy Outlook today.
“High inventories and weak demand do not make a bull market,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
WTI for June delivery slid 54 cents to settle at $95.62 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 3.9 percent above the 100-day average for the time of day at 3:27 p.m. in New York. Futures climbed to $96.16 yesterday, the highest close since April 2. Prices jumped 5.6 percent in the previous three sessions.
Prices were little changed after the American Petroleum Institute reported that U.S. inventories rose 680,000 barrels to 389.1 million. The June contract slid 64 cents to $95.52 a barrel in electronic trading at 4:33 p.m. The contract traded at $95.45 before the report was released at 4:30 p.m.
Brent for June settlement slipped $1.06, or 1.1 percent, to end the session at $104.40 a barrel on the London-based ICE Futures Europe exchange. Volume was 37 percent above the 100-day average. U.K. businesses were closed yesterday for a public holiday, and Brent trading volume was 44 percent below the three-month average.
Brent’s premium to WTI narrowed to $8.78 a barrel, based on settlement prices, from $9.30 yesterday.
U.S. crude stockpiles gained 0.5 percent last week to 397.3 million barrels, according to the Bloomberg survey before tomorrow’s EIA weekly inventory report. That would put them at the highest level since 1931. Eleven respondents forecast an increase and one no change in inventories.
Oil “seems to be losing some momentum with expectations that we are going to see another rise in crude inventories,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
U.S. oil production, which climbed to the highest level since 1992 in April, has exceeded 7 million barrels a day since early February, according to the EIA, the Energy Department’s statistical arm. Gasoline demand slumped 3.8 percent to 8.42 million barrels a day in the week ended April 26 and imports rose 8 percent.
“It’s hard to maintain a strong rally when you are concerned about demand and increasing supplies,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.
Oil production from outside of OPEC will rise 2.1 percent from 2012 to 53.85 million barrels a day in 2013, led by gains in the U.S. and Canada, the EIA said today. The 2013 output projection was up 80,000 barrels a day from April’s report. U.S. output is projected to climb 7.9 percent this year.
The EIA also revised down its forecast for global fuel demand for this year, to 89.93 million barrels a day from 90 million estimated last month.
WTI will average $93.17 a barrel this year, 75 cents below the April estimate, the EIA said in the monthly report. The Brent outlook was $105.89, down from $107.96 last month. Based on those prices, the WTI-Brent spread would average $12.72, narrower than last month’s $14.04 estimate and the year-to-date average of $15.93.
The Brent-WTI premium will widen to $10 to $15 a barrel in the third quarter, amid “upward pressure” on Brent and a “neutral to bearish” forecast for WTI, according to a report dated yesterday by Michael Wittner, the head of oil-market research at Societe General SA in New York.
Daily shipments of the four North Sea crude grades that make up the Dated Brent benchmark will drop to an eight-month low in June as maintenance curtails production at oilfields in the Ekofisk system, according to loading programs obtained by Bloomberg today. That may strengthen the Brent side of the WTI-Brent spread as WTI weakens.
The WTI-Brent spread shrank to $8.58 a barrel on May 3 from $23.18 on Feb. 8, based on settlement prices, amid expectations of an inventory drop in Cushing, Oklahoma, the delivery point for Nymex futures.
Enbridge Inc. said yesterday it will shut the Ozark pipeline to Wood River, Illinois, from Cushing for 10 days starting June 10 for planned maintenance, said Larry Springer, a company spokesman in Houston. The line has the capacity to move 215,000 barrels a day of crude.
Prices also fell as Saudi Arabia pumped the most in five months in April, a person with knowledge of its output said. the world’s largest crude exporter pumped 9.32 million barrels a day in April, about 180,000 barrels more than in March, the person said, declining to be identified because the information is confidential. Output last month was the most since November, when the kingdom pumped 9.49 million barrels a day, oil ministry data showed.
Saudi Arabia is the largest producer in the Organization of Petroleum Exporting Countries.
Implied volatility for at-the-money WTI options expiring in June was 21.7 percent at 3:27 p.m., down from 23 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 508,636 contracts as of 4:34 p.m. It totaled 645,120 contracts yesterday, 10 percent above the three-month average. Open interest was 1.78 million contracts.