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WTI Rises for Second Day as Stockpiles Fall; Brent Climbs

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May 7 (Bloomberg) -- West Texas Intermediate advanced for a second day after an industry report showed crude stockpiles declined in the U.S., the world’s biggest oil consumer. Brent gained in London as the U.S. considered further sanctions on Russia.

Futures rose as much as 1.1 percent in New York. Total U.S. crude inventories shrank by 1.82 million barrels last week as supplies slid at Cushing, Oklahoma, the delivery point for WTI, the American Petroleum Institute said yesterday. The U.S. is discussing further sanctions on Russia amid violence in Ukraine, two White House officials told Congress.

“Hedge funds are very bullish on oil, they have seen the reduction of inventories at Cushing as the explanation for the rally in WTI,” Ole Hansen, the head of commodity strategy at Saxo Bank A/S, said in an interview in Dubai today. “The tension in Ukraine has been adding some support.”

WTI for June delivery increased as much as $1.09 to $100.59 a barrel in electronic trading on the New York Mercantile Exchange, before trading for $100.04 at 1:36 p.m. London time. The contract gained 2 cents to $99.50 yesterday. The volume of all futures traded was about 24 percent below the 100-day average for the time of day. Prices have advanced 1.6 percent this year.

Brent for June settlement rose 10 cents, or 0.1 percent, to $107.16 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $7.14 to WTI on ICE. The spread narrowed for a second day yesterday to close at $7.56.

Crude Supplies

“Cushing inventories are probably getting toward a base level now,” said Ric Spooner, a chief strategist at CMC Markets in Sydney, who predicts investors may sell West Texas contracts if futures climb to $100.50 a barrel. “Prices might otherwise be weaker if it were not for Ukraine.”

Stockpiles at Cushing fell by 1.46 million barrels in the week ended May 2, the industry-funded API reported yesterday. Supplies at the U.S. oil-storage hub may drop to about 20 million barrels in two to three weeks, Adam Longson, a Morgan Stanley analyst in New York, forecast on May 5. They’ve decreased by 39 percent since January to 25.4 million, said the Energy Information Administration, the Energy Department’s statistical arm.

Crude inventories nationwide expanded by 1.25 million barrels last week to about 400.6 million, according to the median estimate of 10 analysts surveyed by Bloomberg before the EIA report today. That would be the highest level since the U.S. began publishing weekly data in 1982.

Supplies have climbed to the most since April 1931, based on monthly government data going back to 1920. Bureau of Mines figures were used for reports before 1976, while Alaskan crude in transit was included from 1981.

Enbridge Pipeline

Enbridge Inc., Canada’s biggest transporter of crude, is waiting to regain power at two pump stations that will allow it to restart a pipeline that can carry as much as 796,000 barrels a day to the U.S. Midwest. The line, which runs to Minnesota from Alberta, was shut May 5. SaskPower International Inc. expects to restore electricity today, according to Tyler Hopson, a spokesman at the utility.

Russia called on Ukraine to postpone a May 25 presidential election as the government in Kiev continued a military offensive against separatists in its east and south. The U.S., which has accused Russia of fomenting unrest, is discussing a third round of penalties with European Union officials that may target Russia’s financial, energy or mining industries.

In Libya, holder of Africa’s largest crude reserves, rebels blocking oil shipments from the eastern region threatened today to occupy two export terminals just weeks after they restarted cargo loadings, jeopardizing a revival in shipments from the North African country. Libya’s crude output dropped to 245,000 barrels a day, from 253,000 barrels yesterday, according to the state-run National Oil Corp.

To contact the reporters on this story: Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net James Herron, Sharon Lindores

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