West Texas Intermediate dropped from its highest closing level in almost four months as a larger-than-forecast increase in U.S. crude inventories fanned speculation that the advance was excessive.
Futures fell as much as 1 percent in New York as a technical indicator approached a level signaling further gains can’t be sustained. Prices increased six times in the past seven days amid freezing temperatures in the U.S. The nation’s crude supplies rose by 3.27 million barrels last week, the Energy Department said yesterday, more than the median estimate in a Bloomberg News survey. Oil inventories in advanced economies tumbled in the fourth quarter by the most since 1999, the International Energy Agency said today.
“We expect prices to ease and we’ll see the weakest prices in the second quarter,” Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo, said today by phone. “Sooner or later cold weather in the U.S. is going to give way to more normal weather.”
WTI for March delivery declined as much as 97 cents to $99.40 a barrel in electronic trading on the New York Mercantile Exchange and was at $99.77 as of 1:24 p.m. London time. The contract climbed 0.4 percent to $100.37 yesterday, the highest close since Oct. 18. The volume of all futures traded was about 6 percent above the 100-day average.
Brent for March settlement, which expires today, lost as much as 70 cents to $108.09 a barrel on London-based ICE Futures Europe. The more-active April contract dropped 18 cents to $108.17. The European crude was at a premium of $8.69 to WTI on the ICE exchange, compared with $8.42 yesterday.
The IEA, a Paris-based adviser to oil-consuming nations, boosted forecasts for global fuel demand this year and the amount of crude that will be required from the Organization of Petroleum Exporting Countries. Stockpiles of crude and refined products shrank by 1.5 million barrels a day in the last three months of 2013 to end the year at 2.6 billion, their lowest level since 2008, the IEA said.
WTI’s 14-day relative strength index rose to 65.7 yesterday, according to data compiled by Bloomberg. That’s the most since Dec. 27, when crude settled at a 10-week high before falling. An RSI above 70 typically signals a market is overbought. Today’s reading is below 61.
“The market has possibly overshot a bit,” said Victor Shum, a vice president at IHS Energy Insight in Singapore.
Distillate stockpiles fell by 731,000 barrels to 113.1 million in the week ended Feb. 7, said the EIA, the Energy Department’s statistical arm. Supplies were forecast to drop by 2.13 million, according to the median estimate of 10 analysts surveyed by Bloomberg.
“The heating-demand season is at its tail end and refiners will enter into maintenance,” Shum said. “Demand may temper going forward and we may see oil prices temper.”
Brent’s premium to WTI was the narrowest since October based on closing prices. The spread has shrunk as the southern portion of TransCanada Corp.’s Keystone XL pipeline began moving crude to the Gulf Coast of Texas from Cushing, Oklahoma, last month. Stockpiles at the storage hub, part of the region known as PADD 2, have declined to 37.6 million barrels, down 10 percent since Jan. 24.
“There was a huge draw in PADD 2 as the Gulf Coast pipeline operated for a second full week,” Michael Wittner, the head of oil market research at Societe Generale SA in New York, said in a report e-mailed today.