WTI Hits Two-Week Low on Concern Plant Fire to Cut DemandMoming Zhou
West Texas Intermediate oil fell to a two-week low on concern that the shutdown of a Kansas refinery will reduce crude demand.
CVR Refining LP shut the 115,000-barrel-a-day Coffeyville plant after a fire in an isomerization unit, the company said. The refinery receives crude from Cushing, Oklahoma, the delivery point for WTI futures. Brent advanced as the European Union agreed to new sanctions on Russia, extending its premium to WTI to the widest in three weeks.
“The Kansas refinery fire is throwing pressure on WTI and strengthening products,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “It’s an important refinery because it’s linked to Cushing.”
WTI for September delivery slid 70 cents, or 0.7 percent, to $100.97 a barrel on the New York Mercantile Exchange, the lowest settlement since July 15. The volume of all futures traded was 1.4 percent above the 100-day average at 3:20 p.m.
Prices were little changed after the American Petroleum Institute was said to report that U.S. inventories dropped 4.4 million barrels last week, according to a person familiar with the data. Cushing stockpiles fell 914,000. WTI slid 61 cents to $101.06 at 4:39 p.m. in electronic trading.
Brent for September settlement gained 15 cents to $107.72 a barrel on the London-based ICE Futures Europe exchange. Volume was 15 percent below the 100-day average. Brent’s premium of $6.75 to WTI was the biggest since July 4.
CVR, which owns 1 million barrels of storage at Cushing and leases 3 million barrels of tanks, says Cushing supplies crude to Coffeyville and the Wynnewood refinery in Oklahoma.
Inventories at Cushing started declining in January after the southern leg of TransCanada Corp.’s Keystone XL pipeline began moving oil from the hub to Gulf refineries. Supplies dropped to 18.8 million barrels in the week ended July 18, the lowest level since 2008, according to the Energy Information Administration.
“The Coffeyville refinery fire could boost supplies at Cushing, even briefly over about a week or so, but that’s enough to impact the Cushing spot market and suppress prices until there’s some visibility into the timetable when oil supplies at the hub would decline again,” said Richard Hastings, a strategist at Global Hunter Securities LLC in Charlotte, North Carolina.
IIR Energy, an energy information provider based in Sugar Land, Texas, reported that some units at Coffeyville will restart within 72 hours. The isomerization unit is expected to be repaired in one to two weeks, according to IIR.
The EU curbed Russia’s access to bank financing and advanced technology in its widest-ranging sanctions yet over the Kremlin’s backing of the rebellion in eastern Ukraine. Russian state-owned banks will be barred from selling shares or bonds in Europe and the export of equipment to modernize the oil industry, a key prop for Russia’s economy, will be restricted an EU official told reporters.
“The market is showing sensitivity to possible problems with Russia,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “There is plenty of support for Brent and it’s playing out in the Brent-WTI spread moving higher.”
The EIA may report tomorrow that U.S. crude inventories declined 1.25 million barrels last week and gasoline supplies climbed 1 million, according to a Bloomberg survey. Gasoline stockpiles increased to 217.9 million in the week ended July 18, the most since March.
“We are in the process of a shift to lower oil prices,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “Demand is weaker.”
Gasoline futures gained as Genscape Inc. reported Irving Oil Corp.’s refinery in Saint John, New Brunswick, shut a 70,000-barrel-a-day fluid catalytic cracker yesterday. The August futures rose 2.17 cents, or 0.8 percent, to $2.8709 a gallon on the Nymex.