WTI Climbs on Smaller-Than-Projected Supply Gain

Updated on

West Texas Intermediate crude advanced after a government report showed that U.S. inventories climbed less than expected while refineries increased operating rates. Brent rebounded from a four-year low.

Stockpiles rose 460,000 barrels to 380.2 million last week, the Energy Information Administration said. A 2.35 million-barrel gain was projected, according to the median of responses in a Bloomberg survey. Refineries bolstered utilization rates for the first time in six weeks as they completed scheduled maintenance. Oil has slumped into a bear market amid speculation that global supply is outpacing demand.

“We should continue to see refinery utilization pick up as the fall maintenance season comes to an end,” Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at John Hancock in Boston, said by phone. “This will increase crude demand.”

WTI for December delivery rose $1.49 to settle at $78.68 a barrel on the New York Mercantile Exchange. It was the biggest gain since Oct. 23. Futures touched $75.84 yesterday, the lowest since October 2011. The volume of all futures traded was 50 percent above the 100-day average at 2:48 p.m. Prices are down 20 percent this year.

Brent for December settlement increased 13 cents to end the session at $82.95 a barrel on the London-based ICE Futures Europe exchange. The contract earlier fell as far as $81.63, the lowest since Oct. 21, 2010. It’s dropped 25 percent in 2014. Volume was 46 percent higher than the 100-day average. The European benchmark closed at a $4.27 premium to WTI, down from $5.63 yesterday.

Cushing Supplies

Crude supplies at Cushing, Oklahoma, delivery point for WTI traded in New York, declined 551,000 barrels to 20.8 million in the week ended Oct. 31, according to the EIA, the Energy Department’s statistical arm.

“We’re getting a robust reaction to the confirmation of a decline in Cushing inventories,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “This cuts against recent sentiment. There’s been an impact on what had been a weaker WTI calendar spread and it’s narrowing the gap with Brent.”

Refineries operated at 88.4 percent of their capacity, up 1.8 percentage point from Oct. 24. U.S. refiners schedule maintenance for September and October as they transition to winter from summer fuels.

U.S. crude output climbed to 8.972 million barrels a day in the latest week, the highest in weekly records dating back to 1983, according to the EIA.

Gasoline, Distillate

Gasoline supplies dropped 1.38 million barrels to 201.8 million last week, today’s EIA report showed. Inventories of distillate fuel, a category that includes heating oil and diesel, fell 724,000 barrels to 119.7 million, the lowest level since June.

Gasoline futures climbed 0.87 cent, or 0.4 percent, to settle at $2.0867 a gallon in New York. Ultra-low sulfur diesel slipped 0.4 cent to close at $2.4387, the lowest settlement since Dec. 1, 2010.

Regular gasoline at U.S. pumps fell to the lowest level since December 2010. The average retail price fell 1 cent to $2.963 a gallon yesterday, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group.

WTI surged as much as 2.8 percent earlier following reports of a pipeline fire in Saudi Arabia. The pipeline was said to carry diesel, not crude, according to a person familiar wit the matter who declined to be identified. It also belongs to a contractor working for the Saudi government rather than Saudi Arabian Oil Co., the state-owned producer, the person said.

Separately, output at Libya’s Sharara oil field was said to be shut today, according to two people familiar with the matter. The field, among Libya’s biggest, has previously produced as much as 250,000 barrels a day.

Supply Glut

Prices have slumped on concern that the Organization of Petroleum Exporting Countries won’t reduce production enough to ease a global supply glut. The 12-member group meets in Vienna on Nov. 27 to discuss its production policy.

Saudi Arabia’s Oil Minister Ali Al-Naimi is scheduled to attend a climate event in Venezuela starting tomorrow, according to embassy officials in Caracas.

“I’ve been flabbergasted by how the selloff in oil has taken on a life of its own,” Stephen Schork, president of Schork Group Inc. in Villanova, Pennsylvania, said by phone. “I’m cautiously bullish and would be willing to dip my toes in the market if December WTI can return to the $92-$93 area.”

Republicans won control of the U.S. Senate, positioning Mitch McConnell, the party’s leader in the chamber, to set the agenda for the final two years of Barack Obama’s presidency.

Keystone Debate

TransCanada Corp. has been waiting since 2008 for a U.S. decision on the pipeline that would carry crude from Alberta’s oil sands across the border to Gulf Coast refineries. While most senators support the proposed Keystone pipeline, the Senate under a Democratic majority hasn’t held a binding vote on the subject since 2012. The Republican-held House has repeatedly voted in favor of construction.

“The Republican win may lead to shifts in energy policy,” Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $120 billion of assets, said by phone. “There may be change to both pipeline approvals and export rules, which could provide additional support to the market. None of these changes would impact supply until much further out.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE