West Texas Intermediate crude fell to a five-week low as U.S. service industries expanded at a slower pace than forecast in December and U.S. fuel supplies rose.
Prices dropped for a fifth day. The Institute for Supply Management’s non-manufacturing index decreased to a six-month low of 53, a report from the Tempe, Arizona-based group showed today. Inventories of gasoline and distillate fuel, including diesel and heating oil, jumped to a two-month high in the week ended Dec. 27, the government reported Jan. 3.
“The fundamentals are still bearish,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “Inventories are high. The momentum is still down.”
WTI for February delivery slid 53 cents, or 0.6 percent, to $93.43 a barrel on the New York Mercantile Exchange, the lowest settlement since Nov. 29. The five-day losing streak is the longest since September. The grade declined 6.3 percent last week, the most since June 2012. The volume of all futures traded was 19 percent below the 100-day average at 2:57 p.m.
Brent for February settlement slid 16 cents to end the session at $106.73 a barrel on the London-based ICE Futures Europe exchange. Volume was 6.5 percent below the 100-day average. The European benchmark crude was at a premium of $13.30 to WTI. The spread was $12.93 on Jan. 3.
Orders shrank in 11 sectors, including real estate, as higher interest rates threatened to slow the pace of home buying that’s been a source of strength for the economy. The median projection in a Bloomberg survey of economists was 54.7 for the ISM index. Readings above 50 indicate growth in the industries that make up almost 90 percent of the economy.
The U.S., the world’s biggest oil user, consumed about 18.6 million barrels a day of oil in 2012, or about one-fifth of the global total, according to BP Plc’s Statistical Review of World Energy.
Stockpiles of distillate fuel rose 5.04 million barrels in the week ended Dec. 27 to 119.1 million, and gasoline inventories gained 844,000 barrels to 220.7 million, the EIA reported Jan. 3. Fuel demand tumbled 7.2 percent, the most since January 2012. Crude supplies slid as Gulf Coast refiners curbed deliveries to reduce local taxes.
Total fuel demand dropped to 19 million barrels a day in the week ended Dec. 27, the lowest level since October, the report showed. Consumption of distillate fuel tumbled 21 percent to percent to 3.31 million. It was the biggest decline in distillate use since July 2003.
“We still have a lot of inventories,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Crude is moving in a $10 band from $90 to $100.”
WTI dropped and Brent reduced gains as Libya started a field in the south and smaller deposits elsewhere resumed after months of disruption, boosting the North African country’s oil production for the first time in 10 months.
Flows from the Sharara field are set to reach 340,000 barrels a day today, Mansur Abdulla, oil movement coordinator at Zawiya Refinery, said in a phone interview.
The field, near Ubari in the south, had been closed for about 90 days because of protests. Libya’s total daily output will rise to 600,000 barrels by tomorrow, according to Ibrahim Al Awami, head of measurement and inspection at the oil ministry.
The country, the holder of Africa’s largest oil reserves, produced 210,000 barrels of oil in December, unchanged from the prior month and the lowest level since September 2011, according to Bloomberg data.
WTI rose earlier as freezing temperatures in the U.S. spurred energy demand. Wind chills plunged past 60 degrees below zero Fahrenheit (minus 51 Celsius) in parts of the upper Midwest. Tomorrow may be the coldest day of the 21st century for the contiguous U.S., beating Jan. 16, 2009, said Matt Rogers, president of Commodity Weather Group in Bethesda, Maryland.
“We are seeing a market that’s supported by cold temperatures,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “We definitely have a well-supplied market.”
About 25 percent of households in the Northeast use heating oil to warm their homes, according to the Energy Information Administration, the Energy Department’s statistical arm.
Implied volatility for at-the-money WTI options expiring in February was 19.6 percent, up from 18 percent on Jan. 3, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 383,070 contracts at 2:58 p.m. It totaled 487,577 contracts on Jan. 3, 7.5 percent below the three-month average. Open interest was 1.63 million contracts.