West Texas Intermediate crude declined from a five-week high on speculation that U.S. inventories are sufficient to meet increasing fuel demand. Brent slipped after elections in Ukraine.
Futures fell 0.2 percent in New York. U.S. crude supplies are near a record high for the time of year even as stockpiles at Cushing, Oklahoma, the delivery point for WTI, dropped to a six-year low in the week ended May 16. Brent declined on speculation that Petro Poroshenko’s victory in the presidential election will help ease tension with Russia.
“There are ample crude supplies here in the U.S.,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “The picture has been muddied because of tightness at Cushing. WTI will be under pressure because there is so much supply elsewhere.”
WTI for July delivery fell 24 cents to settle at $104.11 a barrel on the New York Mercantile Exchange. Futures touched $104.50 for a second day, the highest intraday level since April 21. The volume of all futures traded was 33 percent below the 100-day average at 2:53 p.m.
There was no floor trading in New York yesterday because of the U.S. Memorial Day holiday. Electronic transactions will be booked today for settlement purposes.
Brent for July settlement decreased 30 cents, or 0.3 percent, to end the session at $110.02 a barrel on the London-based ICE Futures Europe exchange. Volume was 21 percent lower than the 100-day average. The range was $109.71 to $110.80. The North Sea crude closed at a $5.91 premium to WTI, down from $6.19 on May 23.
“We had our pre-Memorial Day run-up and a lot of that exuberance has left the market,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “We’ve gotten close to areas that the bulls have found it difficult to break through, $105 for WTI and $111 for Brent. It looks like we’re now set for a correction.”
WTI reached $105.22 on March 3, the 2014 intraday high, and $104.99 in April. Brent touched $111.04 on May 22, the highest intraday level since March 4.
U.S. crude inventories dropped 7.23 million barrels to 391.3 million in the seven days ended May 16, according to the Energy Information Administration. Stockpiles advanced to a record 399.4 million in the week ended April 25. Crude production rose 6,000 barrels a day to 8.43 million in the week ended May 16, the most since October 1986, the EIA said.
Supplies probably increased 250,000 barrels last week, according to the median of eight analyst responses in a Bloomberg survey. The EIA will release last week’s inventory data at 11 a.m. on May 29 in Washington, a day later than usual because of the Memorial Day holiday.
“There’s plenty of oil around,” said Michael Lynch, the president of Strategic Energy & Economic Research in Winchester, Massachusetts. “There’s a feeling that all of the shut-ins and disruptions that are going to happen have taken place. It will take a major disruption to send prices to new highs.”
Ukraine, a conduit for Russian oil and natural gas to Europe, elected Poroshenko amid separatist violence that erupted after Russia annexed the Black Sea peninsula of Crimea in March. A pro-Russian movement has captured large swathes of the Donetsk and Luhansk regions in the eastern part of the country. Russian President Vladimir Putin, who doesn’t recognize the government in Kiev, nonetheless pledged to work with the winner.
“The new Ukrainian president seems both calm and pragmatic,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “Both he and Putin have made statements that have calmed markets.”
Ukrainian forces killed “dozens” of the rebels overnight without suffering any losses as they retook the Donetsk airport, Interior Minister Arsen Avakov said today.
WTI rebounded from its lows as the Standard & Poor’s 500 Index rose to an all-time intraday high on economic optimism.