March 12 (Bloomberg) -- West Texas Intermediate crude fell the most in two months, widening its discount to Brent to more than $10 a barrel, as U.S. supplies surged. The government announced a test sale of Strategic Petroleum Reserve oil.
WTI settled below $100 for the first time since Feb. 11. Crude stockpiles rose 6.18 million barrels last week, the Energy Information Administration said, more than triple the 2 million median estimate of analysts surveyed by Bloomberg. The Obama administration said it plans to offer 5 million barrels of sour crude from the reserve in a test of the distribution system.
“The overall gain in crude stocks is pretty negative,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “That’s a huge build. Crude will probably go down to $95 and find a bottom there.”
WTI for April delivery declined $2.04, or 2 percent, to $97.99 a barrel on the New York Mercantile Exchange, the lowest settlement since Feb. 6. The one-day drop is the biggest since Jan. 2. The volume of all futures traded was more than double the 100-day average at 3:33 p.m. Prices have declined 4.5 percent this week.
Brent for April settlement decreased 53 cents, or 0.5 percent, to $108.02 a barrel on the London-based ICE Futures Europe exchange. Volume was 52 percent above the 100-day average.
WTI settled at a discount of $10.03 a barrel to the European benchmark crude, compared with $8.52 yesterday.
U.S. crude stockpiles increased to 370 million barrels, the highest level since Dec. 13, the Energy Department’s statistical unit said. Supplies at Cushing, Oklahoma, the delivery point for WTI futures, fell 1.34 million barrels to 30.8 million, a two-year low.
Prices have tumbled 6.6 percent since closing at a five-month high of $104.92 on March 3.
“The bigger-than-expected build certainly adds to the bearish thesis,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “The market was way overdone at $104.”
Crude inventories rose as domestic production climbed 1.3 percent to 8.18 million barrels a day, the most since July 1988. Refinery operations slipped 1.4 percentage point to 86 percent of capacity, the least since October.
“The build is reinforcing the large production we have,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market is under pressure.”
Gasoline stockpiles shrank to 223.8 million barrels last week, the lowest level this year. Distillate fuel, including diesel and heating oil, decreased 533,000 barrels to 113.9 million. Analysts had expected a decline of 450,000 in distillate. Gasoline supplies slid 5.23 million barrels. They were forecast to fall 2 million.
Petroleum consumption jumped 4 percent to 19 million barrels a day, the EIA said. Demand for gasoline rose 6.4 percent to 8.95 million.
“The overall demand is strong and it poses a reason to be bullish,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.
The Energy Department announced sales of 4 million barrels of sour crude from the West Hackberry storage area in Louisiana and 1 million from Big Hill in Texas, according to a department filing. The offers are due on March 14. The reserve held 695.9 million barrels of crude last year, according to the department’s website.
Brent’s losses were curbed amid instability in Libya, holder of Africa’s biggest reserves. Ali Zaidan was ousted as Libya’s prime minister by lawmakers yesterday in the culmination of a campaign by Islamists and other opponents to terminate his 17 months in office.
The country is pumping 441,000 barrels of crude today, Mohamed Elharari, a spokesman for the state-run National Oil Corp., said by phone from Tripoli. That’s up from 392,000 yesterday. Libya produced 350,000 in February and 1.4 million in March 2013, according to data compiled by Bloomberg.
Total crude output from the Organization of Petroleum Exporting Countries increased by 258,600 barrels a day last month to 30.1 million, the highest level since August, as Iraq compensated for reductions in Libya and Saudi Arabia, the group said in its monthly oil market report today. OPEC production is in line with its current collective target of 30 million.
Investors added a net $17.6 million yesterday into U.S.- listed exchange-traded funds that invest in energy, equivalent to 0.5 percent of total assets, data compiled by Bloomberg show. There was no new investment into the United States Oil Fund, the biggest oil ETF.
Implied volatility for at-the-money WTI options expiring in May was 19.4 percent, up from 18.7 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 999,340 contracts at 3:33 p.m. It totaled 700,365 contracts yesterday, 39 percent above the three-month average. Open interest was 1.7 million contracts.
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