(For Bloomberg fair value curves, see CFVL <GO>)
Aug. 19 (Bloomberg) -- West Texas Intermediate crude dropped for the first time in seven days as the threat of a storm in the Gulf of Mexico dissipated, removing a risk to oil and gas production in the area.
Futures fell 0.3 percent after the National Hurricane Center in Miami said there was no tropical cyclone activity in the Atlantic basin. Some offshore energy rigs and platforms evacuated personnel last week as a storm precaution. Oil also slid because demand from U.S. refineries is declining as the peak gasoline-use period comes to an end. WTI capped the longest rising streak since April on Aug. 16 on unrest in Egypt.
“Worries about a storm in the Gulf, which helped boost prices late last week, have gone,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund that focuses on energy. “We’ve already seen a downtick in refinery utilization and should see further declines in the weeks ahead and we enter the fall maintenance season.”
WTI crude for September delivery decreased 36 cents to settle at $107.10 a barrel on the New York Mercantile Exchange. The September WTI contract expires tomorrow. The more-active October futures dropped 43 cents, or 0.4 percent, to $106.86. The volume of all futures traded was about 20 percent below the 100-day average at 3:31 p.m.
Brent oil for October settlement fell 50 cents, or 0.5 percent, to end the session at $109.90 a barrel on the London- based ICE Futures Europe exchange. Trading of futures was 13 percent below the 100-day average. The European benchmark closed at a $3.04 premium to WTI.
BP Plc said it may start redeploying workers to platforms in the Gulf of Mexico. Enbridge Inc. said non-essential workers will return to Manta Ray natural gas platforms off the coast of Louisiana today.
Dry air and wind shear are expected to limit tropical storm development in the Atlantic this week, forecasters said. None of the tropical waves moving west across the ocean will find conditions conducive to growth, said Kyle Tapley, a meteorologist at MDA Weather Services in Gaithersburg, Maryland.
U.S. refinery utilization rates dropped 1.5 percentage point to 89.4 percent of capacity in the seven days ended Aug. 9, the Energy Information Administration said Aug. 14. Plants have slowed output in the third quarter of each year since 1999 as they implemented maintenance programs after the end of the peak-demand summer driving season.
“We’re in the midst of the summer August doldrums with nothing to move us strongly in either direction,” said Stephen Schork, president of the Schork Group Inc., an energy-advisory company in Villanova, Pennsylvania. “Here in the U.S., we have plenty of supply because the driving season is coming to an end. At the same time, we have an upsurge in violence in Egypt, which should support Brent.”
About 900 civilians and 100 police officers have died in Egypt since the military-backed government moved last week to dismantle sit-ins held by supporters of the deposed President Mohamed Mursi in Cairo and Giza.
WTI surged 8.8 percent in July as Mursi was overthrown. The country controls the Suez Canal and the Suez-Mediterranean Pipeline, through which a combined 4.51 million barrels a day of crude and refined products were shipped last year, according to the EIA.
“Brent remains stronger than WTI, and that is a reflection of geopolitical risk,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Anything occurring in the Middle East has a bigger impact on Europe.”
Goldman Sachs Group Inc. raised its price forecasts for Brent, citing supply disruptions in Libya and Iraq. Prices may climb to about $115 a barrel in the “very near term,” Goldman Sachs said in the report today.
“The disruptions in Libyan oil supplies have lasted far longer than we initially thought, with no near-term resolution in sight, which was further complicated by the involvement of the military,” said Jeffrey Currie, a Goldman analyst in New York. “Combined with the ongoing problems in Iraq, which we see extending into the autumn, OPEC outages since the beginning of the summer have taken 33 million barrels off the market.”
Libya’s National Oil Corp. declared force majeure on loadings from Zuetina, Ras Lanuf, Es Sider and El Brega ports, according to two people with knowledge of the matter and a document obtained by Bloomberg. Force majeure is a legal step that protects a company from liability when it can’t fulfill a contract for reasons beyond its control.
Libyan crude output tumbled 330,000 barrels to 800,000 barrels a day in July, the least since December 2011, a Bloomberg survey showed. The Organization of Petroleum Exporting Countries member holds Africa’s largest proved reserves.
Money managers cut WTI net-long positions, or wagers on price gains, by 2,041 futures and options combined, or 0.7 percent, to 308,786 in the seven days ended Aug. 13, the U.S. Commodity Futures Trading Commission said Aug. 16. For Brent, money managers raised bullish bets 2.5 percent to 193,527, the most in data from January 2011, ICE Futures Europe data showed.
Implied volatility for at-the-money WTI options expiring in October was 21.2 percent, down from 21.4 percent Aug. 16, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 450,843 contracts as of 3:31 p.m. It totaled 603,709 contracts Aug. 16, 6.9 percent below the three-month average. Open interest was 1.89 million contracts.
--With assistance from Brian K. Sullivan in Boston, Laura Hurst in London, Maher Chmaytelli in Dubai and Ramsey Al-Rikabi in Singapore. Editors: Margot Habiby, Dan Stets