Crude Falls First Time in Five Days on Emerging Economies

West Texas Intermediate crude fell for the first time in five days as equities declined on concern that growth in emerging economies will slow, reducing fuel use.

Futures decreased 0.7 percent. U.S. stocks dropped a fourth day as the MSCI Emerging Markets Index slid 1.4 percent, extending its loss for the year to 5.2 percent. Currencies from developing countries have tumbled, according to Bloomberg data, as signs of weakness in China’s economy added to speculation that stimulus curbs by the U.S. Federal Reserve will cut demand.

“Concerns about the emerging-market outlook are weighing on sentiment for demand going forward,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The situation is very volatile and we are seeing it impact all the markets.”

WTI for March delivery dropped 68 cents to settle at $96.64 a barrel on the New York Mercantile Exchange. It closed at $97.32 yesterday, the highest settlement this year. The volume of all contracts traded was 5.4 percent below than the 100-day average at 3:17 p.m. Prices climbed 2.4 percent this week.

Brent for March settlement increased 30 cents, or 0.3 percent, to end the session at $107.88 a barrel on the ICE exchange. Volume was 1.6 percent lower than the 100-day average. The North Sea oil advanced 1.4 percent this week.

The spread between WTI and Brent grew to $11.24 a barrel from $10.26 at yesterday’s close. Earlier today, it shrank to $9.49, the least since Nov. 8, on the opening of a pipeline linking the central U.S. to the Gulf Coast. The gap has narrowed from $19.38 on Nov. 27.

Emerging Markets

Benchmark equity gauges from Poland to South Africa and Brazil slid at least 1.2 percent, while the Turkish lira drove losses in 18 of 24 developing-nation currencies.

More than $940 billion has been erased from the value of emerging-market equities since the Fed signaled in May that it could start scaling back bond purchases that boosted demand for higher-yielding assets. A Bloomberg gauge tracking 20 emerging-market currencies fell to the lowest level since April 2009 today, tumbling 9.9 percent over the past 12 months, bigger than any annual decline since it slid 15 percent in 2008.

The Standard & Poor’s 500 Index fell 1.9 percent and the Dow Jones Industrial Average slipped 1.7 percent.

Keystone XL

The southern leg of TransCanada Corp.’s Keystone XL pipeline is initially transporting 288,000 barrels of light, sweet crude a day to Nederland, Texas, from Cushing, Oklahoma, the delivery point for WTI traded in New York. Flows will rise over the course of the year toward its 700,000-barrel capacity, executives said at a press conference in Calgary on Jan. 22.

The proposed northern portion of Keystone XL, which would stretch from Alberta’s oil sands to Nebraska, is being held up because it requires a presidential permit. TransCanada split its original project after President Barack Obama rejected a prior route in 2012 because of fears its path through Nebraska would threaten ecologically sensitive lands.

U.S. crude inventories expanded by 990,000 barrels to 351.2 million, ending a seven-week run of decreases, the Energy Information Administration said in a report yesterday. Stockpiles of distillate fuel, a category that includes heating oil and diesel, declined by 3.21 million barrels to 120.7 million last week, according to the EIA, the Energy Department’s statistical arm.

Refinery Utilization

Refineries operated at 86.5 percent of capacity, down 3.5 percentage points from the prior week, yesterday’s report showed. Refinery utilization rates have dropped in the month of January in nine of the last 10 years, according to EIA data. Units are idled at the start of the year after preparing for the winter heating season in November and December.

“We have the introduction of all this light, sweet oil taking place as refineries go into turnarounds,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “The oil can’t be exported, so inventories should build along the Gulf, which will put renewed downward pressure on WTI.”

Industry advocates such as Senator Lisa Murkowski of Alaska are calling for an end to 39-year-old restrictions on U.S. crude exports. Murkowski, the top Republican on the Senate Energy Committee, called on Obama on Jan. 7 to end the limitations and vowed to introduce legislation if he doesn’t.

Frigid temperatures and snowstorms have struck from the Midwest to the East Coast for the second time this month, crimping operations at refineries and bolstering demand for heating fuels.

Diesel Fuel

Ultra low sulfur diesel rose 6.09 cents, or 2 percent, to close at $3.1374 a gallon in New York. It was the highest settlement since Sept. 6. Volume was 45 percent higher than the 100-day average.

Implied volatility for at-the-money WTI options expiring in March was 18.4 percent, up from 18.1 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 444,696 contracts at 3:18 p.m. It totaled 646,012 contracts yesterday, 27 percent higher than the three-month average. Open interest was 1.59 million contracts, the lowest level since Feb. 4.

Before it's here, it's on the Bloomberg Terminal.