West Texas Intermediate oil fell the most this month on forecasts that U.S. supplies rose last week and as the euro weakened against the dollar. Brent’s premium to the U.S. benchmark widened on tension in Ukraine and Libya.
WTI dropped 1.3 percent. U.S. inventories probably grew 500,000 barrels, near the highest level for this time of year, according to a Bloomberg survey of 11 analysts before a government report tomorrow. The euro slid to a three-month low versus the dollar as German unemployment unexpectedly increased.
“There’s a lot of oil,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at Manulife Asset Management in Boston. “Prices are higher than you would expect given how robust supplies are.”
WTI for July delivery slid $1.39 to $102.72 a barrel on the New York Mercantile Exchange, the lowest settlement since May 20. It was the biggest one-day decline since April 30. The volume of all futures was 3.1 percent below the 100-day average at 5 p.m. in New York.
Prices were little changed after the American Petroleum Institute said U.S. crude inventories rose 3.49 million barrels. WTI declined $1.09, or 1.1 percent, to $103.02 a barrel at 4:35 p.m. in electronic trading. It was $102.99 before the API released its data at 4:30 p.m.
Brent for July settlement declined 21 cents to $109.81 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures was 14 percent below the 100-day average. WTI was at a discount of $7.09 to Brent. The spread closed at $5.91 yesterday, the narrowest in six weeks.
U.S. crude supplies probably increased to 391.8 million barrels in the seven days ended May 23, according to the Bloomberg survey before an Energy Information Administration report tomorrow. Stockpiles advanced to a record 399.4 million in the week ended April 25, according to the EIA, the Energy Department’s statistical arm. Petroleum demand slipped 3 percent to 18.9 million barrels a day in the week ended May 16.
“When you step back and consider the fundamental picture, we still have a lot of supplies,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “If we don’t continue to see tightening fundamentals, at these kinds of levels the market really has a hard time to attract new investment.”
The EIA will release last week’s inventory data at 11 a.m. tomorrow, a day later than usual because of the Memorial Day holiday.
The euro fell as much as 0.3 percent to $1.3589. A weaker euro and stronger dollar reduce oil’s investment appeal.
“The dollar is making a new swing higher and it’s putting some pressure on crude,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “We are starting to see some selling ahead of the inventory data.”
Trading in WTI has averaged 502,000 contracts a day in May, the lowest level since December. The price is up 3 percent this month.
“People are not ready to invest in $104 oil until they see higher demand,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “We are not seeing a lot of volume in the oil market. Interest in oil is weak.”
Inventories at Cushing, Oklahoma, the delivery point for WTI futures, may have increased, according to Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC and Phil Flynn, senior market analyst at the Price Futures Group in Chicago.
Cushing supplies have decreased 15 out of 16 weeks, to 23.2 million barrels from 41.8 million, as the southern leg of the Keystone XL pipeline began moving oil to Gulf Coast refineries from the hub.
“The only supply issue is Cushing,” Hodge said. “Supplies aren’t necessarily where we want them. It would be good to get a build there.”
Brent fell less than WTI as Ukraine’s government said it will press on with military operations against pro-Russian rebels after its forces retook Donetsk airport and inflicted “significant” losses on the insurgency.
In Libya, the disruption of crude exports worsened as rebels shut down a recently reopened oil port after protesting over the appointment of the country’s new prime minister. Petroleum Facilities Guards members aligned with federalist rebels stopped loadings at the Hariga oil port in eastern Libya, Oil Ministry Director of Measurement Ibrahim Al Awami said by telephone from Tripoli.