WTI Crude Rises on Seaway Expansion as Brent Gap Shrinks
West Texas Intermediate crude rose the most in two weeks, narrowing its discount to Brent, after Enterprise Products Partners LP said it would more than double the capacity of its Seaway pipeline as early as May.
Prices increased 1.7 percent. The expanded line will be able to move more than 850,000 barrels a day of oil to Houston from Cushing, Oklahoma, the futures’ delivery point. Stockpiles at the hub tumbled to a two-year low March 7. A government report tomorrow will probably show they dropped again last week, three analysts forecast. Brent gained less than WTI on speculation sanctions on Russia won’t disrupt oil shipments.
“The Seaway news is the trigger,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “This story clearly explains why WTI is firmer than Brent. Seaway expansion will draw more crude away from Cushing.”
WTI for April delivery climbed $1.62 to settle at $99.70 a barrel on the New York Mercantile Exchange, the biggest rally since March 3. April futures’ premium to May grew to 82 cents, the widest level since Feb. 26. The volume of all futures traded was 34 percent above the 100-day average at 4:49 p.m.
Prices were little changed after the American Petroleum Institute reported U.S. inventories grew 5.92 million barrels last week and Cushing supplies fell 1.04 million. WTI rose $1.48, or 1.5 percent, to $99.56 in electronic trading at 4:49 p.m. It was $99.57 before the report was released at 4:30 p.m.
Brent for May settlement advanced 55 cents, or 0.5 percent, to end the session at $106.79 a barrel on the London-based ICE Futures Europe exchange. Volume was 20 percent below the 100-day average. The European benchmark crude settled at $106.24 a barrel yesterday, the lowest close since Feb. 4. It was at a premium of $7.91 to WTI for the same month, compared with $8.62 yesterday.
The expanded Seaway pipeline will be in service in late May or early June, Bill Ordemann, senior vice president of Enterprise, said today during an analyst day presentation in Houston. The company had previously projected a late-second-quarter opening.
Inventories at Cushing dropped to 30.8 million barrels on March 7, the least since February 2012, according to the Energy Information Administration. Supplies have decreased since TransCanada Corp. (TRP) began operating the southern section of Keystone XL pipeline in January to move oil to the Gulf Coast.
Stockpiles at the hub probably fell by 1.4 million barrels last week, Finlon said. Phil Flynn, senior market analyst at the Price Futures Group in Chicago, estimated a 1.5 million-barrel decrease. Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois, also predicted a drop.
Total inventories climbed 2.75 million, according to nine analysts in a Bloomberg survey before the EIA report tomorrow.
Brent, the European benchmark, rose less than WTI on speculation oil supplies will remain unaffected amid U.S. and European Union sanctions against Russia, the world’s largest crude producer, following Crimea’s vote to secede from Ukraine.
President Vladimir Putin signaled that Russia isn’t about to occupy eastern Ukraine, blaming Western encroachment for forcing him to annex Crimea in a move that’s sparked the worst diplomatic crisis since the Cold War.
April WTI futures traded above the 100-day and 200-day moving averages at around $97.20. Prices fell to as low as $97.37 yesterday.
“There is a lot of moving-average support,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “We have inventory data tomorrow. Cushing has been the driver.”
Implied volatility for at-the-money WTI options expiring in May was 18.6 percent, up from 18.3 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 623,281 contracts at 4:49 p.m. It totaled 551,511 contracts yesterday, 7.5 percent above the three-month average. Open interest was 1.64 million contracts.
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