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Crude Falls to 12-Week Low on Supply Report

West Texas Intermediate crude fell to a 12-week low as inventories unexpectedly rose last week and demand slipped.

Prices slid for a fifth day after the Energy Information Administration reported stockpiles increased 2.64 million barrels. Analysts had forecast a 1 million-barrel decrease. Gasoline consumption declined 2 percent to 8.85 million barrels a day. WTI also followed losses in equities on concern that lawmakers won’t reach a deal to avoid a government shutdown.

“The build in crude is surprising and demand is coming down,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “It’s a very bearish report. I wouldn’t be surprised to see prices get down to $100 by the end of the week.”

WTI crude for November delivery slipped 47 cents, or 0.5 percent, to $102.66 a barrel on the New York Mercantile Exchange, the lowest settlement since July 3. Futures have retreated 5 percent in the past five days, the longest run of declines since Dec. 10. The volume of all futures traded was 13 percent below the 100-day average at 3:37 p.m. Prices are up 6.3 percent this quarter and 12 percent in 2013.

Brent for November settlement fell 32 cents, or 0.3 percent, to $108.32 a barrel on the London-based ICE Futures Europe exchange. Volume was 25 percent above the 100-day average. The European benchmark’s premium to WTI grew 15 cents to $5.66, the widest level since Sept. 5.

U.S. Inventories

Crude supplies climbed for the first time in four weeks, according to data from the EIA, the Energy Department’s statistical arm. They rebounded to 358.3 million barrels from 355.6 million the prior week, the least since March 2012.

Total petroleum demand fell 2.8 percent to 19.3 million barrels a day. Refineries reduced their utilization rate to 90.3 percent, the lowest level since Aug. 9.

“The big story is the big drop in refinery utilization,” said Jacob Correll, a Louisville, Kentucky-based commodity analyst at energy management firm Schneider Electric Professional Services. “If utilization had been higher, we would have seen big draws.”

Crude inventories at Cushing, Oklahoma, WTI’s delivery point, slipped 412,000 barrels to 32.8 million on Sept. 20, the lowest level since February 2012, the report showed. Supplies have tumbled 34 percent since June 28 and dropped for 12 weeks.

Budget Talks

WTI also fell as the Standard & Poor’s 500 Index dropped for a fifth day. The Senate, by unanimous vote today, advanced a House stopgap spending measure as a federal government shutdown looms. Before sending the bill back to the House, Senate Democrats plan to strip language from the House version that would choke off funding for the 2010 health-care law.

Unless an agreement is reached to expedite Senate consideration of the measure, a vote on passage could occur as late as Sept. 29. That would give the House just one full workday to act before spending authority expires.

Brent, the European benchmark, declined less than WTI as Iran’s President Hassan Rohani rebuffed President Barack Obama’s attempt at direct engagement in the United Nations yesterday.

“The Iranian president was not as conciliatory as people had expected,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The build is making WTI weaker than Brent.”

Iran Overtures

Obama told world leaders yesterday in New York that he welcomed overtures from Rohani and the prospect of resolving a decades-long confrontation. Iranian officials told their U.S. counterparts that the time wasn’t yet right for even a handshake between the two leaders.

Rohani offered softer rhetoric yesterday in his speech at the UN without conceding his country’s right to nuclear power.

Iran has the world’s fourth-largest proven oil reserves after Venezuela, Saudi Arabia and Canada, according to the BP statistical review. Sanctions aimed at stopping the Islamic republic’s nuclear program have hindered its oil exports.

Implied volatility for at-the-money WTI options expiring in November was 21.2 percent, little changed from yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 480,624 contracts as of 3:37 p.m. It totaled 552,340 contracts yesterday, 12 percent below the three-month average. Open interest was 1.88 million contracts.

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