West Texas Intermediate advanced for the first time in four days ahead of a Federal Reserve decision on bond purchases and U.S. government data forecast to show crude inventories fell to the lowest in a year.
Futures gained as much as 1.1 percent. Crude stockpiles dropped by 1.2 million barrels last week to 359 million, the least since August 2012, a Bloomberg News survey showed before a report today from the Energy Information Administration. The Federal Open Market Committee wraps up a two-day policy meeting at which it will probably decide to curb its $85 billion of monthly bond purchases, according to the median response of 64 economists in a Bloomberg News survey.
“Positioning for tonight’s Fed decision looks to be the main reason” for oil’s move, said Michael Poulsen, an analyst at Global Risk Management in Middlefart, Denmark. “What will be interesting is how the markets will interpret the action. Will a taper mean the economy is back on track or will the focus be on lower amounts of money being shipped into the market.”
WTI for October delivery rose as much as $1.15 to $106.57 a barrel in electronic trading on the New York Mercantile Exchange and traded for $105.81 at 1:28 p.m. London time. The contract dropped to $105.42 yesterday, the lowest close since Aug. 22. The volume of all futures traded was about 9 percent more than the 100-day average.
Brent for November settlement slipped 16 cents to $108.03 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of as little as $2.70 a barrel to WTI, the narrowest gap since Aug. 13, amid the revival of some supplies from Libya.
Analysts are divided on the amount by which the Fed will scale back its monthly asset purchases. Among 64 economists surveyed by Bloomberg, 33 predict it will reduce its buying of Treasuries by $5 billion or less, with 31 forecasting a cut of $10 billion or more.
Libya, the holder of Africa’s largest oil reserves, is seeking to boost output to 700,000 barrels a day this week from as little as 200,000 barrels, according to state-owned National Oil Corp. Libya lifted force majeure at its Zawiya and Mellitah terminals yesterday amid “improving conditions,” NOC said on its website. Production has resumed from the El Feel and Sharara fields, which will add a combined 400,000 barrels a day, Nuri Berruien, chairman of the company, said yesterday.
“The Libyan premium is dissipating,” said Mark Keenan, a director of commodities research and strategy at Societe Generale SA in Singapore. “Libya is likely to remain an issue. Unless output is significantly restored by the beginning of October, the beginning of the seasonal demand period, the Libyan premium will return.”
Labor disputes at ports, storage facilities and oil fields have crippled exports from Libya, a member of the Organization of Petroleum Exporting Countries. It pumped about 1.6 million barrels a day a year ago, a Bloomberg survey of producers and analysts shows.
Crude stockpiles in the U.S., the world’s biggest oil consumer, decreased by 252,000 barrels in the week ended Sept. 13, according to data from the American Petroleum Institute yesterday. The EIA, the Energy Department’s statistical unit, is scheduled to release its Weekly Petroleum Status Report at 10:30 a.m. in Washington today.
Supplies at Cushing, Oklahoma, the largest U.S. oil-storage hub and the delivery point for New York-traded crude futures, fell by 889,000 barrels, the API report shows.
Gasoline inventories dropped by 641,000 barrels, the industry group said. The EIA report will probably show an increase of 500,000 barrels, the median estimate of 11 analysts surveyed by Bloomberg showed. Distillate stockpiles, a category that includes heating oil and diesel, fell by 167,000 barrels, according to the API, and compares with a projected 500,000 barrel gain for the government data.