West Texas Intermediate advanced for a third day after U.S. retail sales gained and German investor confidence topped forecasts. Brent crude climbed to a four-month high in London on supply disruptions.
WTI gained 0.7 percent as Commerce Department data showed U.S. retail sales rose for a fourth month in July. The ZEW Center for European Economic Research’s index of German investor and analyst expectations rose to 42 in August, more than the 39.9 median forecast in a Bloomberg survey. Brent extended its premium to WTI as Libya’s biggest oil terminal was shut and South Sudan worked to avoid halting exports.
“The positive economic news from both the U.S. and Europe is outweighing any negative factors,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The retail sales numbers were good and we’re seeing the markets respond.”
WTI crude for September delivery rose 72 cents to settle at $106.83 a barrel on the New York Mercantile Exchange. It was the highest settlement since Aug. 2. The volume of all futures traded was less than 1 percent above the 100-day average.
Prices were little changed after the American Petroleum Institute was said to report U.S. crude supplies fell 999,000 barrels last week. Futures were up 50 cents, or 0.5 percent, at $106.61 a barrel at 4:39 p.m. in electronic trading. WTI traded at $106.54 before the API release at 4:30 p.m. in Washington.
Brent oil for September settlement climbed 85 cents, or 0.8 percent, to end the session at $109.82 a barrel on the London-based ICE Futures Europe exchange. It was the highest closing price since April 2. Trading was 3 percent below the 100-day average. The European benchmark traded at a $2.99 premium to WTI at today’s settlement, up from $2.86 yesterday.
The 0.2 percent increase in retail sales followed a 0.6 percent gain in June that was larger than previously reported, according to figures issued today in Washington.
Mannheim-based ZEW’s index, which aims to predict economic developments six months in advance, rose to the highest level since March.
Brent rose on potential supply disruptions. An official at the Libyan port of Es Sider said the port shut after opening on Aug. 11. It was closed July 28 amid protests by the Petroleum Facilities Guard, which is pressing for better working conditions.
Interruptions at ports and other installations across Libya reduced the country’s oil production to 800,000 barrels a day in July, half the rate of a year earlier, according to a Bloomberg survey of output by members of the Organization of Petroleum Exporting Countries.
South Sudan is producing 160,000 barrels a day, Petroleum Minister Stephen Dhieu Dau said on Aug. 9. The nation seceded from Sudan in July 2011 and took three-quarters of the formerly united country’s output of 490,000 barrels a day.
In Europe, a gas turbine at the North Sea Ula platform that handles crude from three oil fields broke down on Aug. 7, Jan Erik Geirmo, a BP spokesman in Stavanger, Norway, said in an e-mail yesterday. The affected fields, which feed into the Ekofisk stream, were producing 8,000 barrels a day, according to estimates by the Norwegian Petroleum Directorate.
“Brent is stronger than WTI right now because of several fundamental factors,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “The Libyan situation is unstable, there might be another disruption from South Sudan and there’s the drop in Ekofisk output from the North Sea.”
U.S. crude inventories dropped 1.5 million barrels to 361.8 million last week, according to a Bloomberg News survey of 11 analysts before a report tomorrow from the Washington-based Energy Information Administration. That would leave supplies at the lowest level since Jan. 11.
Crude output rose 18,000 barrels a day to 7.56 million on Aug. 2, the most since December 1989, according to last week’s EIA report.
“There have been some disruptions but they’ve had no impact on WTI,” Schork said. “The U.S. isn’t thirsty for oil, we have plenty of it.”
WTI has climbed 16 percent this year as the Federal Reserve maintained unprecedented monetary stimulus. Prices fell in intraday trading on speculation the central bank will curb its $85 million in monthly bond purchases.
Federal Reserve Bank of Atlanta President Dennis Lockhart, who has backed the stimulus plan, said today that policy makers may start to slow buying at any of their next few meetings amid “uneven performance” by the economy. Lockhart, who doesn’t vote on monetary policy this year, gave a speech in Atlanta.
“The retail sales numbers today were another positive sign for the economy,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Each positive piece of data brings forward the prospect that the Fed will soon cut its stimulus efforts.”
Implied volatility for at-the-money WTI options expiring in October was 21.8 percent, little changed from yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 577,739 contracts as of 4:40 p.m. It totaled 555,788 contracts yesterday, 15 percent below the three-month average. Open interest was a record 1.93 million contracts.