West Texas Intermediate traded near the lowest level in more than a week on forecasts that U.S. supplies climbed to the highest since at least 1931 amid production the IEA said is “transformative” for world markets.
Futures fell for a fourth day in New York on speculation that rising supplies will counter signs of an economic recovery. Crude inventories probably increased 450,000 barrels to 396 million in the week ended May 10, according to a Bloomberg News survey before Energy Department data tomorrow. Growth in North American production will be as significant for markets as China’s economic boom, the International Energy Agency said.
“Supply-demand is skewed to the oversupply side,” said Michael Poulsen, an analyst at Global Risk Management in Middelfart, Denmark. “There is currently a lot of spare capacity and global crude overproduction. The multi-decade high in U.S. supply will keep weighing on WTI.”
WTI for June delivery was at $94.59 a barrel, down 58 cents, or 0.6 percent, in electronic trading on the New York Mercantile Exchange at 1:41 p.m. London time. The volume of all contracts traded was 5 percent above the 100-day average. Prices fell 87 cents to $95.17 yesterday, the lowest close since May 2.
Brent for June settlement on the London-based ICE Futures Europe exchange lost 70 cents and was at $102.12 a barrel. The European benchmark grade was at a premium of $7.55 to WTI futures. The spread was $7.65 yesterday, the narrowest based on closing prices since January 2011.
North America will provide 40 percent of the world’s new supplies to 2018 through the development of light, tight oil from shale deposits and oil sands, the IEA said in its medium-term market report. Global oil demand will increase by 6.1 million barrels a day, or 6.7 percent, to 96.7 million a day by 2018 as the recovery gathers pace, the Paris-based agency said.
The IEA, which also released its monthly oil market report today, increased its forecast for global oil demand in 2013 for the first time since January, following revisions to estimates of German gasoil consumption.
The agency raised the 2013 estimate by a “marginal” 65,000 barrels a day, predicting that world oil use will climb this year by 800,000 barrels a day, or 0.9 percent, to 90.6 million a day.
U.S. gasoline stockpiles probably shrank by 1.1 million barrels last week, according to the median estimate of 10 analysts surveyed by Bloomberg. Distillate-fuel inventories, including heating oil and diesel, climbed by 425,000 barrels, the survey shows.
The American Petroleum Institute in Washington is scheduled to release separate supply data today. The industry group collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Information Administration for its weekly survey.
Brent may drop below its April low of $96.75 a barrel as it completes a technical formation known as an Elliot Wave correction, according to Ric Spooner, a chief market analyst at CMC Markets in Sydney. The benchmark crude for half of the world’s oil has a “potentially bearish setup” and investors may sell contracts when prices are near the 50-day moving average of about $105.60, he said.