WTI Crude Falls to 10-Day Low on Fuel Storage

West Texas Intermediate crude dropped to the lowest level in 10 days as falling demand boosted fuel inventories and on concern that the Federal Reserve will curb stimulus. Futures fell 1.1 percent this week.

Prices slid 0.9 percent. Stockpiles of gasoline and distillate fuels jumped the most in 11 months in the seven days ended Dec. 6, the Energy Information Administration reported Dec. 11. More economists than a month before forecast that the Fed will start slowing its bond purchases at a meeting next week, according to a December Bloomberg survey.

“Demand is weak and if we don’t see it become stronger, the market will come under pressure,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Products are being put into storage, basically driving the market lower. The market is concerned about Fed tapering.”

WTI for January delivery declined 90 cents, or 0.9 percent, to $96.60 a barrel on the New York Mercantile Exchange, the lowest settlement since Dec. 3. The volume of all futures traded was near the 100-day average at 3:36 p.m. WTI increased $6.98 from Nov. 27 to Dec. 11, based on intraday prices.

Brent for January settlement, which expires on Dec. 16, rose 16 cents to $108.83 a barrel on the London-based ICE Futures Europe exchange. The more-active February contract decreased 6 cents to $108.32. Volume was 12 percent below the average. The European benchmark crude was at a $12.23 premium to WTI, compared with $11.06 yesterday, based on January prices.

‘Massive Rally’

“WTI had a massive rally, going up $7 in two weeks on what?” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “The market’s just running out of gas and traders are pulling the plug. We started to see some technical selling.”

WTI fell as the January futures approached a “death cross” formation in which a shorter-term moving average slips below a longer-term average, Ilczyszyn said. WTI’s 50-day moving average was $97.13, moving closer to the 200-day average of $96.75.

Demand for gasoline slid to 8.35 million barrels a day last week, falling for the fifth consecutive time, according to the EIA, the Energy Department’s statistical arm. Total petroleum consumption dropped 7.1 percent to 18.6 million, the least since Oct. 18.

Fuel Supplies

Gasoline stockpiles jumped 6.72 million barrels last week to the highest level since Oct. 4 and inventories of distillate increased 4.54 million. Refineries ran at 92.6 percent of capacity, the most since July 12.

Domestic crude production climbed to 8.08 million barrels a day, the most since 1988. Output has surged as a combination of horizontal drilling and hydraulic fracturing, or fracking, unlocked supplies trapped in shale formations from Texas to North Dakota.

WTI will decrease through Dec. 20 on weaker fuel demand, 16 of 31 analysts and traders surveyed by Bloomberg said.

The Fed will start paring stimulus at a Dec. 17-18 meeting, according to 34 percent of economists surveyed Dec. 6 by Bloomberg, an increase from 17 percent in on Nov. 8.

Fed officials are monitoring progress in the labor market as they debate when to pullback on $85 billion a month in bond purchases, known as quantitative easing. Policy makers have said they may taper “in coming months” if the economy improves as expected.

The dollar gained as much as 0.3 percent to $1.3709 per euro, strengthening for a second day. Increases in the dollar reduce oil’s appeal as an alternate investment.

Tapering Speculation

“People are expecting that there will be tapering next week,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “You are seeing strong dollar and that putting pressure on commodities.”

Implied volatility for at-the-money WTI options expiring in February was 16.5 percent, up from 16.2 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 502,799 contracts at 3:36 p.m. It totaled 508,686 contracts yesterday, 11 percent below the three-month average. Open interest was 1.66 million contracts.

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