Oil Steady as Stockpile Expectations Counter Products

Oil was little changed in New York as rising prices of gasoline and heating oil countered expectations that U.S. stockpiles rose from a three-month low last week.

Prices moved less than 21 cents for the fourth straight day as products jumped after Motiva Enterprises LLC shut a crude unit at its Port Arthur, Texas, refinery and inventories were expected to gain 2 million barrels, according to a Bloomberg survey before an Energy Department report tomorrow.

“The strong product prices are offset by the fact that we are expecting a crude inventory build,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “There is an expectation that inventories will rise and that’s one of the reasons that crude is more subdued than products.”

Crude oil for February delivery slid 4 cents to settle at $93.15 a barrel on the New York Mercantile Exchange. Prices are down 8.3 percent in the past year. Trading volume was 17 percent below the 100-day average at the close of floor trading.

Prices were little changed after the American Petroleum Institute said U.S. oil inventories grew 2.36 million barrels a day last week to 360.8 million. Crude was up 2 cents at $93.21 a barrel at 4:33 p.m. in electronic trading.

Brent oil for February settlement advanced 54 cents, or 0.5 percent, to end at $111.94 a barrel on the London-based ICE Futures Europe exchange. Brent volume was 24 percent above the 100-day average at the settlement.

Premium Widens

Brent’s premium over West Texas Intermediate oil in New York widened to $18.79 from $18.21, the first increase in four days. The premium has narrowed from $25.53 on Nov. 15 as Enterprise Products Partners LP and Enbridge Inc. prepare to resume service on the 500-mile (805-kilometer) Seaway link at full rates after more than doubling its capacity to 400,000 barrels a day from 150,000.

Gasoline and heating oil advanced by at least 0.5 percent for a second day as Motiva shut down the 325,000-barrel-a-day crude unit on Jan. 6 after trying to restart it when a clamp that was modified to fix an earlier leak failed.

The crude unit, the largest of three at Port Arthur, shut for repairs several days after its May debut. It’s a key part of a $10 billion expansion that will almost double the plant’s processing capacity to 600,000 barrels a day.

Gasoline for February delivery rose 1.7 cents, or 0.6 percent, to settle at $2.7944. February heating oil advanced 2.64 cents, or 0.9 percent, to $3.0585.

“There was strength in products, the Motiva situation in particular, that’s giving oil support,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy.

Watching Stockpiles

Oil stockpiles increased by 0.6 percent to 362 million in the seven days ended Jan. 4, according to the median of 10 analyst estimates in the Bloomberg survey. Eight respondents forecast a gain and two a decrease.

Inventories tumbled 11.1 million barrels in the week ended Dec. 28 as imports dropped to a 13-year low. Stockpiles have decreased during December and risen in January for the past six years because of inventory shifts for tax and accounting purposes. Companies in Gulf Coast states minimize supplies at the end of the year to reduce local taxes.

“It won’t shock me at all if we end up having a 5 million to 6 million build,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “It’s not uncommon to have big drops at the end of year and that’s done for tax purposes.”

‘Following Stocks’

Oil rose as much as 0.7 percent in intraday trading before slipping with equities and the euro. The Standard & Poor’s 500 Index dropped as much as 0.7 percent. The euro fell as much as 0.5 percent against the dollar to $1.3057. A weaker euro and stronger dollar reduce oil’s appeal as an investment alternative.

“Oil is following stocks,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. Earlier “the whole energy complex is higher due to strong products.”

The Energy Department increased oil-price projections for 2013 and boosted the global consumption forecast. WTI will average $89.54 a barrel this year, up 1.3 percent from the December projection of $88.38, the department said today in its monthly Short-Term Energy Outlook. Brent will average $105.17 a barrel in 2013, up 1.4 percent from last month’s forecast.

The department increased its projection for global oil consumption this year to 90.11 million barrels a day from 90 million last month.

WTI slid in 2012 as the U.S. shale boom deepened a glut at Cushing, Oklahoma, America’s biggest storage hub and the delivery point for the New York contract. That left it at an average $17.48 a barrel below Brent last year, versus a premium of about 95 cents in the 10 years through 2010.

Electronic trading volume on the Nymex was 378,117 contracts as of 4:33 p.m. Volume totaled 397,682 contracts yesterday, 18 percent below the three-month average. Open interest was 1.47 million.

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