Crude trades low after US stockpiles surge
West Texas Intermediate traded near its lowest closing price this year after U.S. crude stockpiles increased almost five times more than estimated. The North Sea Brent pipeline system remained shut for a fifth day yesterday.
WTI futures fluctuated after falling yesterday for the fourth time in five days. Crude supplies increased by 3.8 million barrels last week, a U.S. Energy Department report showed yesterday, compared with a projected 788,000 barrels in a Bloomberg News survey. It's unclear when the Brent network will resume operations, according to an official from Abu Dhabi National Energy Co. (TAQA) PJSC, the pipeline operator known as Taqa.
"The Energy Department report yesterday was bearish for crude," said Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark. "Fundamentally, the oil market remains balanced."
WTI for April delivery was at $90.51 a barrel, up 8 cents, in electronic trading on the New York Mercantile Exchange at 9:17 a.m. London time. The volume of all futures traded was 36 percent below the 100-day average. WTI closed at $90.12 a barrel on March 4, the lowest settlement since Dec. 24.
Brent for April settlement on the London-based ICE Futures Europe exchange was at $110.92 a barrel, down 14 cents. The volume was 2.5 percent higher than the 100-day average. The European benchmark crude was at a premium of $20.41 to WTI futures from $20.63 yesterday, when it narrowed for the first time in five days. WTI has technical support along its lower Bollinger Band, about $89.70 a barrel today, according to data compiled by Bloomberg. Futures yesterday traded below the indicator before rebounding to settle higher for a second day, signaling chart support, where buy orders may be clustered.
US crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the country's biggest oil-storage hub, rose 257,000 barrels to 50.8 million, the highest level in a month, data from the Energy Information Administration, the Energy Department's statistical unit, showed. Supplies nationwide climbed to 381.4 million, the most since June. Distillate inventories, including heating oil and diesel, fell 3.8 million barrels, according to the EIA. They were projected to fall by 1 million barrels. Gasoline supplies were down by 616,000 barrels, less than a forecast decline of 1 million barrels. Refinery utilization decreased 2.9 percentage points from the previous week to 82.2 percent, the lowest rate since March 16, 2012. Processing was forecast to rise 0.4 percentage point in the Bloomberg survey of analysts. Weakness in U.S. oil demand may be overstated because of disruptions at pipelines and terminals from Hurricane Sandy in October that have made it difficult for refiners to ship products, Stefan Wieler, a London-based analyst at Goldman Sachs Group Inc., said in a report.
The death of Venezuelan President Hugo Chavez on March 5 should have a limited impact on the country's oil production in the short term, while a change of leadership may foster longer- term investment and boost output, the bank said. Venezuela pumped 2.86 million barrels a day of crude last month, according to a Bloomberg survey of producers and analysts. Production from the 27 North Sea oil fields that make up the Brent system was shut March 2 after Taqa reported a leak in one leg of the Cormorant Alpha platform. The pipeline normally carries 90,000 barrels a day of oil, equivalent to 10 percent of U.K. output, though 10,000 barrels a day was already offline after a similar incident at the same platform on Jan. 14.