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WTI Falls for Second Day; Fed Tapering Speculation Grows

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Aug. 20 (Bloomberg) -- West Texas Intermediate crude fell for a second day amid speculation the Federal Reserve will reduce bond purchases next month, curbing investor appetite for commodities and other higher-risk assets.

Futures slid as much as 1.2 percent, following a decline yesterday that snapped the longest rising streak in almost four months. U.S. central bankers gather this week in Jackson Hole, Wyoming, to discuss monetary policy. Crude inventories probably shrank by 1.25 million barrels to 359.2 million last week, the lowest since September, according to a survey before a report from the Energy Information Administration tomorrow.

“There is a lot of uncertainty about future Fed policy and leadership,” said Guy Wolf, global head of market analytics at Marex Spectron Group in London. “Until that is resolved I think there will be volatility” in prices, he said.

WTI for September delivery, which expires today, dropped as much as $1.33 to $105.77 a barrel in electronic trading on the New York Mercantile Exchange, and was at $106.01 as of 1:37 p.m. in London. It slipped 0.3 percent yesterday to $107.10, ending a six-day rally that was the longest since April 25. The more active October contract slid 95 cents to $105.91. Trading volume was about 15 percent below the 100-day average, according to data compiled by Bloomberg.

Brent for October settlement decreased as much as $1.29, or 1.2 percent, to $108.61 on the London-based ICE Futures Europe exchange, leaving the European benchmark at a premium of $3.35 to WTI, widening for the first time in three days.

Downtrend Line

Minutes from the Fed’s July meeting will be published tomorrow. U.S. central bankers have indicated an improving jobs market could spur cuts to their $85 billion in monthly asset purchases.

WTI yesterday halted an intraday advance near the downtrend line that connects the intraday highs of July 19 and Aug. 2, which is at $108.22 a barrel today. Sell orders tend to be clustered around chart-resistance levels.

U.S. gasoline stockpiles probably fell by 1.25 million barrels in the week ended Aug. 16, according to the median estimate of 10 analysts surveyed by Bloomberg. Distillate inventories, a category that includes heating oil and diesel, are forecast to have gained by 750,000 barrels.

Refinery operating rates probably dropped by 0.55 percentage point, the survey showed. U.S. refiners typically boost output to meet increased fuel demand during the so-called summer driving season from late May to early September.

Libyan Output

The American Petroleum Institute is scheduled to release separate inventory data today. The industry group in Washington collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA, the Energy Department’s statistical arm, for its weekly survey.

Brent will average $111 a barrel in the third quarter, Societe Generale SA said today, reiterating an earlier forecast. The Paris-based bank also maintained its fourth-quarter and 2014 projections.

Disruptions to Libya’s oil supply have had a “muted” impact on prices because the market is heading into a period of seasonally lower refinery runs, said Mike Wittner, a New York-based analyst at Societe Generale.

Libya declared force majeure at four oil ports Aug. 18 after security guards went on strike. State-run National Oil Corp. halted exports of crude and refined products from the Es Sider, Ras Lanuf, Zueitina and Brega terminals, according to a document obtained by Bloomberg. Force majeure is a legal clause suppliers can invoke when they miss shipments because of circumstances beyond their control.

The country produced 800,000 barrels a day last month, half the rate of a year earlier, according to a Bloomberg survey of output from the 12-member Organization of Petroleum Exporting Countries. Libya holds Africa’s largest oil reserves.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

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

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