WTI Falls as U.S. Inventories Increase More Than Expected

West Texas Intermediate crude fell to the lowest in more than two years after an Energy Information Administration report showed U.S. inventories increased more than forecast last week.

Stockpiles climbed 7.11 million barrels in the week ended Oct. 17, the EIA said in a weekly report. Analysts surveyed by Bloomberg had expected a gain of 3 million. Refiners operated at the lowest level since March, reducing gasoline inventories.

“It’s definitely a surprise and a bearish report,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The further decline in the utilization rate obviously causes crude oil inventory to back up.”

WTI for December delivery slid $1.97, or 2.4 percent, to $80.52 a barrel on the New York Mercantile Exchange, the lowest settlement for front-month futures since June 28, 2012. The volume of all futures traded was about 9.6 percent above the 100-day average for the time of day.

Brent for December settlement fell $1.51, or 1.8 percent, to $84.71 a barrel on the London-based ICE Futures Europe exchange. Volume was 4.8 percent below the 100-day average. The European benchmark crude was at a premium of $4.19 to WTI on ICE, compared with $3.73 yesterday.

Crude inventories increased to 377.7 million barrels last week, the highest since July, according to the EIA. Supply has grown about 21 million barrels in the past three weeks. Stockpiles at Cushing, Oklahoma, the delivery point for WTI futures, rose to 20.6 million.

Operating Rate

“It’s a very bearish report,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania.

Inventories along the Gulf Coast, known as PADD 3, increased 5.38 million barrels to 195.7 million. The refinery operating rate decreased to 86.7 percent, the lowest since March 21. U.S. refiners schedule maintenance for September and October as they transition to winter from summer fuels.

“Having the utilization rate at 86.7 percent is usually indicative of us being at the peak of turnaround season right now,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “The severity of crude builds will eventually start to slacken.”

Gasoline stockpiles fell by 1.3 million barrels to 204.4 million, the EIA said. Analysts expected a drop of 1.45 million. Distillate stockpiles rose 1.05 million barrels to 125.7 million.

Product Supply

“Lower refinery runs, due to refinery maintenance, contributed not only to lower crude demand but also lower refined product supply,” Harry Tchilinguirian, BNP Paribas SA’s London-based head of commodity markets strategy, said in an e-mail.

Gasoline futures dropped 2.6 percent to $2.1556 a gallon on the Nymex.

Both WTI and Brent have plunged more than 20 percent from their June highs, meeting the common definition of a bear market.

Investors are buying into funds that track oil prices at the fastest rate in two years, betting that crude will rebound from a bear market. The four biggest oil exchange-traded products listed in the U.S. received a combined $334 million this month through Oct. 20, the most since October 2012, according to data compiled by Bloomberg.

The Organization of Petroleum Exporting Countries needs to reduce crude output by at least 500,000 barrels a day, Samir Kamal, Libya’s OPEC governor, said by e-mail today. It’s the first time since the market collapse that an OPEC member has suggested how much production should be cut.

Kamal said his comments reflected personal views, not the official Libyan position.

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