West Texas Intermediate crude traded little changed in its worst start to any year since 2009 amid estimates U.S. fuel stockpiles increased for a third week, signaling slowing demand in the world’s biggest oil consumer.
Futures declined 6.4 percent in New York since Dec. 31. Distillate inventories, including heating oil and diesel, probably rose by 1.38 million barrels last week, a Bloomberg News survey showed before Energy Information Administration data tomorrow. Deutsche Bank AG lowered its 2014 forecasts for WTI and Brent amid “rampant U.S. oil-supply growth.”
“We’re bearish for the first few months of the year,” said Frank Klumpp, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, Germany. “The market will be driven by the supply side in 2014. Maybe the trend of better-than-expected U.S. supplies will continue in 2014.”
WTI for February delivery rose as much as 53 cents, or 0.6 percent, to $92.33 in electronic trading on the New York Mercantile Exchange and was at $92.16 at 1:09 p.m. London time. The volume of all futures traded was about 24 percent below the 100-day average. The contract fell 92 cents to $91.80 yesterday.
Brent for February settlement slipped 20 cents to $106.55 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade was at a premium of $14.40 to WTI.
Deutsche Bank predicts average prices in 2014 of $88.75 a barrel for WTI and $97.50 for Brent, a report e-mailed today showed, compared with respective previous projections of $98.75 and $106.25. The latest estimates are about $10 a barrel lower than 2013 levels, according to the bank.
“A third year of rampant U.S. oil-supply growth propelled by tight/shale oil development” is “increasingly painting a picture of an oversupplied global oil balance,” said Soozhana Choi, Deutsche Bank’s head of energy research in Washington.
WTI crude-options volatility jumped yesterday to the highest level since Nov. 29. Implied volatility for at-the-money March WTI options, a measure of expected futures movements and a key gauge of value, rose to 19.62 percent, up from 18.27 percent on Jan. 10.
WTI closed at an eight-month low of $91.66 a barrel on Jan. 9 amid surging crude output and reduced fuel use in the U.S. Production climbed by 24,000 barrels a day to 8.15 million in the week ended Jan. 3, the fastest rate since September 1988, according to the EIA, the Energy Department’s statistical arm.
U.S. crude inventories probably shrank by 1.15 million barrels in the week to Jan. 10, according to the median estimate of eight analysts surveyed by Bloomberg before the EIA report. Stockpiles decreased the prior six weeks to 357.9 million barrels. Gasoline supplies are forecast to have gained 2.2 million barrels.
“There’s a lot of finished product in the U.S.,” David Lennox, a resource analyst at Fat Prophets in Sydney, said by telephone today. “We don’t expect to see a draw-down, and that’s going to keep pressure on prices.”
The industry-funded American Petroleum Institute in Washington will release separate supply data today.
The commodities cycle is reversing and may drive raw materials into a structural bear market, said Goldman Sachs Group Inc. An expansion in shale oil output will keep U.S. energy prices low, sustain economic growth and lead to further tapering of government stimulus, the bank said in a report dated Jan. 12. This will cut raw-material demand in emerging markets and weaken currencies, encouraging production, it said.
The Federal Reserve is poised to take a preliminary step toward limiting banks’ activities with commodities amid Congressional scrutiny, according to three people briefed on the discussions. The central bank is planning to release a notice seeking information on ways to curb ownership and trading of some commodities as it tries to cut risk for deposit-taking banks, said the people, who asked not to be identified because the talks are private.