Crude Caps Biggest Monthly Gain Since AugustMoming Zhou and Mark Shenk
West Texas Intermediate crude climbed, capping the biggest monthly gain since August, as inventories at a major hub dropped to a 15-month low and the U.S. economy grew more than projected in the second quarter.
Prices advanced 1.9 percent after the government said supplies at Cushing, Oklahoma, the delivery point for New York futures, slid 4.3 percent last week. They were at a record in January. Gross domestic product rose at a 1.7 percent annualized rate in a Commerce Department report. Futures extended gains in the last half hour of regular trading as the Federal Reserve said it would maintain monthly bond purchases.
“If we continue to see Cushing supplies drop, it could signify the end of the bottleneck there,” said Julius Walker, global energy markets strategist at UBS Securities LLC in New York. “It could signal that Cushing is being structurally drained, which would be supportive of WTI, although I don’t think we’re there yet.”
WTI for September delivery rose $1.95 to settle at $105.03 a barrel on the New York Mercantile Exchange, up 8.8 percent for the month. The volume of all futures traded was 3 percent below the 100-day average at 3:42 p.m.
Brent for September settlement advanced 79 cents, or 0.7 percent, to end the session at $107.70 a barrel on the London-based ICE Futures Europe exchange. It increased 5.4 percent in July. Volume was 4 percent below the 100-day average.
The European benchmark’s premium to WTI shrank to $2.67 from $3.83 yesterday. The gap has narrowed from more than $23 earlier this year as improved pipeline networks and the use of rail links eased a North American supply glut created by rising production of crude from shale formations.
Cushing inventories dropped 1.9 million barrels last week to 42.1 million, the least since April 2012, according to the Energy Information Administration, the Energy Department’s statistical arm. Supplies decreased 7.53 million barrels this month, the most in nine years of data.
Overall U.S. stockpiles unexpectedly increased 431,000 barrels last week to 364.6 million, the EIA said. Stockpiles tumbled 29.9 million in the four weeks ended July 19, the biggest such decline since 1982.
Second-quarter GDP grew faster than the 1 percent pace forecast by economists surveyed by Bloomberg. The Commerce Department also issued comprehensive revisions with today’s report that showed the recovery from the worst U.S. recession in the post-World War II era has been stronger than previously estimated.
“The GDP report is significantly better than expectations and it reinforces the concept of modest growth in the U.S. economy,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “The economic picture in the medium and long term looks more supportive for oil prices.”
The U.S., the world’s biggest oil-consuming country, accounted for about a fifth of global demand in 2012, according to BP Plc’s Statistical Review of World Energy.
“The GDP is surprisingly good and it should be supportive for energy demand,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.
Prices extended gains after the Fed said it will continue its $85 billion in monthly bond purchases. The central bank offered no new details on possible tapering of the quantitative easing policy after a two-day policy meeting at which the central bank also kept interest rates unchanged.
“It shows they are not in a rush to end the QE program,” Schenker said. “It should be bullish for crude.”
OPEC crude output dropped for a second month in July, led by the biggest plunge in Libyan production since the 2011 war that overthrew Muammar Qaddafi, a Bloomberg survey showed.
Output in the 12-member Organization of Petroleum Exporting Countries slipped 245,000 barrels, or 0.8 percent, to an average 30.662 million barrels a day this month from a revised 30.907 million in June, according to the survey of oil companies, producers and analysts.
Libya, holder of Africa’s biggest crude reserves, has closed all oil terminals except Zawiya amid labor protests, Oil Minister Abdulbari Al-Arusi said at a press briefing today in Tripoli. The closures will reduce exports by some 1.1 million barrels a day from yesterday’s level of 1.425 million, he said.
Implied volatility for at-the-money WTI options expiring in September was 21.6 percent, compared with 22.1 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 539,789 contracts as of 3:42 p.m. It totaled 546,596 contracts yesterday, 17 percent below the three-month average. Open interest was 1.84 million contracts.