WTI Advances on Houston Ship Channel Closing; Brent SlipsMoming Zhou and Mark Shenk
West Texas Intermediate crude rose on concern that the closing of the Houston Ship Channel will disrupt operations at Gulf Coast refineries. Brent fell.
WTI increased for the fourth time in five days with traffic stopped on the waterway, a key transit route for crude and fuel, since a fuel-oil spill caused by a March 22 collision. Exxon Mobil Corp. reduced operating rates at its Baytown, Texas, refinery and other plants considered changes. WTI also rose on speculation that crude supplies fell at Cushing, Oklahoma, the delivery point for WTI futures.
“The closure is going to impact flows of crude going into Gulf refineries,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “It’s going to push up WTI prices. Cushing stocks will see another decline.”
WTI for May delivery climbed 14 cents to end at $99.60 a barrel on the New York Mercantile Exchange. The volume of all contracts traded was 43 percent below the 100-day average.
Brent for May settlement slipped 11 cents to $106.81 a barrel on the London-based ICE Futures Europe exchange. Volume was 40 percent below the 100-day average. The U.S. benchmark was at a discount of $7.21 to Brent.
More than 90 vessels are backed up in the channel, according to the U.S. Coast Guard. Workers have refloated a barge whose six tanks were carrying 22,000 barrels of ship fuel when the collision occurred near Texas City, Texas.
“Cushing continues to shed barrels,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The closure of the Houston Ship Channel also played a role. WTI continues to pivot around $100.”
Cushing stockpiles may have fallen 1.5 million barrels last week, according to Phil Flynn, senior market analyst at the Price Futures Group in Chicago. Finlon and Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois-based consulting company, also forecast declines.
Supplies at the hub decreased 12 million barrels in the seven weeks ended March 14 to a two-year low of 29.8 million, according to the Energy Information Administration, the Energy Department’s statistical arm.
U.S. crude inventories climbed 7.3 percent to 375.9 million barrels in the nine weeks ended March 14, government data show. The EIA will probably report a 10th increase on March 26, according to a Bloomberg survey of analysts.
“We’re in waiting mode right now but there remains a lot of bearish sentiment in the market,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The disruption in Houston won’t be reflected in inventories until next week’s report. We won’t be losing supply, just seeing a delay, and that may end with a flood all at once.”
WTI reduced gains as U.S. stocks fell for a second day following economic data that signaled a slowdown in manufacturing. The Markit Economics preliminary index of U.S. manufacturing decreased to 55.5 in March from 57.1 a month earlier, the London-based group said today. The Standard & Poor’s 500 Index dropped as much as 0.9 percent.
“The market is balancing the impact of the closure of the Houston Ship Channel with concerns about the weak economy,” Flynn said. “The economic data wasn’t really strong.”
Implied volatility for at-the-money WTI options expiring in May was 17.4 percent, up from 17.1 percent March 21, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 252,116 contracts at 2:51 p.m. It totaled 392,794 contracts March 21, 24 percent below the three-month average. Open interest was 1.6 million contracts, the lowest since Feb. 6.