(For Bloomberg fair value curves, see CFVL <GO>)
March 13 (Bloomberg) -- West Texas Intermediate was little changed after an Energy Information Administration report showed that U.S. inventories climbed to a seasonal high. WTI’s discount to Brent narrowed to the lowest level in six weeks.
WTI slipped 2 cents as the EIA, the Energy Department’s statistical arm, said supplies rose 2.62 million barrels to 384 million last week, the most for any week in March in records dating to 1982. The report was projected to show a 2.3 million- barrel gain, according to a Bloomberg survey. Crude output climbed 66,000 barrels a day to 7.16 million, the most since July 1992. The International Energy Agency cut its 2013 global demand estimate.
“The rise in U.S. oil production is boosting inventories and should keep a lid on prices,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at Manulife Asset Management in Boston.
Crude oil for April delivery settled at $92.52 a barrel on the New York Mercantile Exchange. The contract advanced as much as 0.9 percent before the release of the EIA report at 10:30 a.m. in Washington. Trading was 34 percent above the 100-day average as of 2:34 p.m.
Brent oil for April settlement dropped $1.13, or 1 percent, to $108.52 a barrel on the London-based ICE Futures Europe exchange. Futures touched $107.91, the lowest level this year. April futures expire tomorrow. Trading was 48 percent above the 100-day average.
The European benchmark grade settled at a $16 premium to WTI, the sixth consecutive decline and the narrowest spread since Jan. 22.
WTI’s discount to Brent oil widened to as much as $23.44 on Feb. 8 on concern that limits on the Seaway pipeline trimming flows to the Houston area would bolster a glut at Cushing, Oklahoma, the delivery point for the New York futures contract.
Crude stockpiles at Cushing fell 1.53 million barrels to 49.3 million last week, the EIA report showed. It was the biggest one-week decline in supply since May 2011. Supplies at the hub rose to a record 51.9 million in the week ended Jan. 11.
U.S. crude oil production has surged as the combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in states including North Dakota, Texas and Oklahoma.
“The rebound of U.S. oil output has been a major surprise,” Hodge said. “The U.S. oil industry seemed to be in terminal decline a few years ago. This is going to be very good for the U.S. from an economic standpoint.”
Gasoline stockpiles fell by 3.57 million barrels to 224.3 million last week, the lowest level this year, according to the EIA. Supplies of distillate fuel a category that includes heating oil and diesel, rose 83,000 barrels to 120.4 million.
The Paris-based IEA curbed estimates for global fuel consumption in 2013 by 60,000 barrels a day, predicting demand will increase by 820,000 to 90.6 million amid “elusive” economic growth.
The Organization of Petroleum Exporting countries pumped 30.49 million barrels a day in February, up from January’s output of 30.34 million, the IEA said in its monthly oil market report. Iraqi output rose 5.7 percent to 3.14 million barrels a day in February, according to the IEA.
“Rising OPEC production is putting downward pressure on Brent,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
Brent, the benchmark for more than half the world’s oil, is more sensitive to changes in Middle Eastern and North African production because Europe has a greater dependence on supplies from the region.
Euro-area industrial output fell more than economists forecast in January, adding to signs that the region’s recession extended into the first quarter. Factory production in the 17- nation euro zone dropped 0.4 percent from December, when it rose a revised 0.9 percent, the European Union’s statistics office in Luxembourg said today.
“There’s more of a negative tone to the energy complex,” said John Kilduff, a partner at Again Capital LLC, a New York- based hedge fund that focuses on energy. “Rising inventories here and problems in Europe are putting downward pressure on prices.”
Saudi Arabia, Iraq and Kuwait, OPEC’s biggest producers, are in talks to ship extra crude to India as the nation prepares to halt purchases from Iran because of global sanctions, four people with knowledge of the matter said.
Indian refiners, who are waiting for an order from the oil ministry to stop buying Iranian cargoes, are discussing annual term contracts with the countries for the year starting April 1, the people said this week, asking not to be identified because the information is confidential.
Iranian oil shipments advanced 13 percent to 1.28 million barrels a day last month even as the U.S. implemented sanctions complicating sales from the nation, the IEA said
Electronic trading volume on the Nymex was 630,823 contracts as of 3:24 p.m. It totaled 724,564 contracts yesterday, the most since Feb. 11 and 34 percent above the three-month average. Open interest was 1.72 million contracts, down from a record 1.73 million the prior day.
--With assistance from Grant Smith and Rupert Rowling in London and Nayla Razzouk in Dubai. Editors: Richard Stubbe, Dan Stets