WTI Falls Sixth Week in Longest Losing Streak Since 1998Mark Shenk
West Texas Intermediate crude capped a sixth weekly decline, the longest stretch of losses in 15 years, as rising U.S. supplies countered speculation that the Federal Reserve will maintain stimulus of the economy.
Futures fell 0.8 percent this week, poised for the longest streak since December 1998. U.S. crude stockpiles climbed for an eighth week as output expanded to the highest level since January 1989, data yesterday from the Energy Information Administration showed. WTI rebounded earlier after Janet Yellen, the nominee for Fed chairman, said yesterday the central bank shouldn’t end its asset-purchase program too soon.
“We are looking at swollen supplies here as production continues to rise, which has put a lot of downward pressure on WTI,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “As long as the Fed appears to be continuing its stimulus ad infinitum, WTI isn’t going to fall below $90.”
WTI for December delivery advanced 8 cents to settle at $93.84 a barrel on the New York Mercantile Exchange. Futures are up 2.2 percent this year. The volume of all futures traded was 29 percent below the 100-day average at 2:46 p.m.
Brent for January settlement rose 22 cents to end the session at $108.50 a barrel on the London-based ICE Futures Europe exchange. The December contract expired yesterday after rising 1.3 percent to $108.54. Volume was 17 percent lower than the 100-day average.
The European benchmark crude was at a $14.01 premium to WTI for the same month, compared with $14.78 yesterday, the highest based on closing prices since March. The spread was $6.04 on Sept. 30.
“The Brent premium could easily continue to grow because of the North American supply picture,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “I would hate to stand in front of a runaway train, which is what the WTI-Brent spread is right now.”
Crude inventories surged 2.64 million barrels to 388.1 million last week, according to the EIA, the Energy Department’s statistical arm. Crude output rose 123,000 barrels a day to 7.98 million, the report showed. Horizontal drilling and hydraulic fracturing, or fracking, have unlocked supplies in shale formations in North Dakota, Texas and other states.
Stockpiles at Cushing, Oklahoma, the delivery point for WTI contracts and the nation’s largest oil-storage facility, climbed by 1.69 million barrels to 38.2 million, in the seven days ended Nov. 8. Stockpiles at the hub have climbed five weeks, the longest stretch of gains since January.
“Cushing supplies rose about 1.7 million barrels in yesterday’s report and have gained 5.6 million barrels since Oct. 4, which are huge numbers for the delivery point,” Yawger said. “There can be short-term rallies but WTI will have a hard time getting though $95 after the big gains at Cushing.”
WTI may advance next week on signs the Fed will maintain stimulus, according to a separate Bloomberg survey. Nine of 23 analysts and traders, or 39 percent, forecast futures will rise through Nov. 22. Eight respondents projected little change and six said prices will decrease.
Yellen said she’s committed to promoting a strong economic recovery. Her testimony to the Senate Banking Committee in Washington yesterday signaled she may maintain the strategies of Chairman Ben S. Bernanke, whose term ends on Jan. 31.
Data today showed manufacturing in the New York region unexpectedly contracted in November. A separate report showed total industrial production in the U.S. fell 0.1 percent in October as output at mines and utilities declined. Factory output rose more than forecast.
Brent front-month futures rose 3.2 percent this week after a meeting between Iran and six world powers concluded last weekend in Geneva without coming to an agreement on the nation’s nuclear program, tempering projections of a resolution to the dispute that has cut Iranian oil exports. The talks with the five permanent members of the UN Security Council and Germany will resume Nov. 20 in the Swiss city.
The European benchmark grade is more sensitive to potential changes in Middle East output than WTI because Europe depends more on the region’s production.
President Barack Obama said yesterday at a White House news conference that he supports giving Iran “modest” relief on sanctions in exchange for progress on nuclear talks and urged Congress to hold off on imposing more economic penalties.
Implied volatility for at-the-money WTI options expiring in January was 17.9 percent, down from 18.4 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 375,827 contracts as of 2:49 p.m. It totaled 894,849 contracts yesterday, the most since July 11 and 55 percent above the three-month average. Open interest was 1.7 million contracts, the lowest level since March 26.