WTI Crude Rises to One-Month High; Brent Spread NarrowsGrant Smith
West Texas Intermediate crude rose to the highest in a month as Cyprus agreed on an international bailout, allaying concern that Europe’s debt crisis will worsen. WTI narrowed its discount to Brent to the least since July.
Futures climbed as much as 1.1 percent in New York after capping a third weekly gain on March 22. Cyprus agreed on the outlines of an aid package with the European Union, European Central Bank and International Monetary Fund. Iraq will fail to achieve output targets for next year, the chairman of the country’s oil and energy committee said. Global markets are a “little” oversupplied, Kuwaiti Oil Minister Hani Hussain told reporters in the Gulf nation.
“The market has calmed down a bit around Cyprus,” said Thina Saltvedt, an analyst at Nordea Bank AG, who predicts Brent crude will average $110 a barrel in the next quarter. “We expect momentum to pick up in the world economy and support demand for oil.”
WTI for May delivery rose as much as 98 cents to $94.69 a barrel in electronic trading on the New York Mercantile Exchange, the highest since Feb. 21, and was at $94.48 as of 12:18 p.m. London time. The volume of all futures traded was 27 percent below the 100-day average for the time of day. The contract advanced $1.26 to $93.71 a barrel on March 22, the highest close since March 18.
Brent for May settlement was at $108.32 a barrel, up 66 cents, on the London-based ICE Futures Europe exchange. The volume of all futures traded was 31 percent below the 100-day average. The European benchmark crude’s premium to WTI narrowed to as little as $13.44, the least since July 10.
Euro-area finance ministers approved the agreement between Cyprus and the so-called “troika” of international institutions in overnight talks in Brussels. The deal paves the way for 10 billion euros ($13 billion) of emergency loans and makes Cyprus the fifth country to tap a rescue since the euro debt crisis started in Greece in 2009. The European Union accounted for 16 percent of the world’s oil demand in 2011, according to BP Plc’s Statistical Review of World Energy.
“If we see some recovery of the situation of the European crisis, including Cyprus and others, we will see the commodity markets be more positive,” said Tetsu Emori, a commodity fund manager at Astmax Investment Management Inc. in Tokyo. “Selling pressure has disappeared, and WTI has hit a bottom at around $90. The market should be turning around, with upside to $94.”
Money managers raised bullish bets on WTI in the week ended March 19, according to the Commodity Futures Trading Commission.
Net-long positions in WTI held by money managers, including hedge funds, commodity pools and commodity-trading advisers, rose by 5,324 futures and options combined, or 3.2 percent, to 172,268, the CFTC’s Commitments of Traders report showed last week. They also increased bullish bets on gasoline for the first time in four weeks.
WTI’s gain may stall as prices approach technical resistance at the 50-day moving average, at $94.37 a barrel today, according to data compiled by Bloomberg. Sell orders are typically clustered near resistance levels.
In London, hedge funds and other money managers raised bullish bets on Brent crude from their lowest level in three months, according to data from ICE Futures Europe.
Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 126,414 lots in the week ended March 19, the London-based exchange said today in its weekly Commitment of Traders report. The increase of 6,982 contracts, or 5.9 percent, is the first in six weeks. Last week net-longs fell to their lowest since Dec. 18.
Morgan Stanley predicted a “marginal narrowing” of the difference between Brent and WTI, with the spread averaging $14.50 this year. The gap may contract faster than the bank forecasts if BP’s refinery in Whiting, Indiana, resumes operations after maintenance earlier than scheduled, Adam Longson, an analyst in New York, wrote in a report today.
The Organization of Petroleum Exporting Countries isn’t concerned by production of oil and natural gas from shale formations in the U.S. as this will stabilize global markets in the long term, Kuwaiti Oil Minister Hani Hussain said today. Crude prices will probably remain near current levels, he said.
Iraq is unlikely to reach its output target of 4.5 million barrels a day in 2014 because of bureaucratic obstacles and the absence of a national energy law, Adnan al-Janabi, chairman of the country’s oil and energy committee, said today at a conference in Dubai.