(For Bloomberg fair value curves, see CFVL <GO>)
Oct. 7 (Bloomberg) -- West Texas Intermediate declined as oil production in the Gulf of Mexico resumed after Tropical Storm Karen weakened and the U.S. came closer to breaching its debt ceiling.
Futures slid as much as 1.3 percent after companies including Chevron Corp. and BP Plc returned staff to platforms as Karen was downgraded to a depression and passed offshore facilities.House of Representatives Speaker John Boehner said yesterday the chamber can’t pass an increase to the U.S. debt ceiling without packaging it with other provisions, which President Barack Obama has resisted. Shipments of North Sea crudes will increase in November to the most in 21 months.
“When we had fear about a hurricane and missing supply in the Gulf of Mexico, we had a reaction upwards, and now as this fear wanes the price moves down,” said Frank Klumpp, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, Germany, who predicts Brent will slide toward $100 a barrel by year-end. “The market will continue to be supply-driven, and the larger moves in price will come from supply factors.”
WTI for November delivery slipped as much as $1.34 to $102.50 a barrel in electronic trading on the New York Mercantile Exchange. It was at $102.92 as of 1:19 p.m. London time. The volume of all futures traded was about 34 percent below the 100-day average.
Brent for November settlement fell as much as $1.57 to $107.89 a barrel on the London-based ICE Futures Europe exchange. The European benchmark was at a premium of $5.82 to WTI, little changed from $5.62 on Oct. 4.
Brent futures dropped as loading programs showed a 10 percent gain in November supplies of the four grades that make up the Dated Brent benchmark. Daily exports of Brent, Forties, Oseberg and Ekofisk crudes will rise to 980,000 barrels next month, from 890,323 in October, shipping schedules obtained by Bloomberg News showed. That’s the most February 2012.
Brent’s premium over WTI will average $9 a barrel next year as the U.S. Gulf Coast “progressively becomes saturated with domestic light sweet crude,” Goldman Sachs Group Inc. said in a report today. The bank raised its estimate from $8.50.
About 866,000 barrels a day of oil production from the Gulf of Mexico and 48 percent of the region’s natural gas output, or 1.8 billion cubic feet daily, was shut as of Oct. 6, according to the U.S. Bureau of Safety and Environmental Enforcement.
BHP Billiton Ltd. was resuming normal operations as it returned workers to platforms, the company said in an e-mailed statement yesterday. The Louisiana Offshore Oil Port planned to resume tanker offloading, said Barbara Hestermann, a spokeswoman. LOOP, the only U.S. port capable of handling ultra- large crude carriers, had suspended tanker operations, the Covington, Louisiana-based company said on its website.
The remnants of Karen were located over southeastern Alabama, extending southward over the waters of the north- central Gulf, the National Hurricane Center said in a bulletin at 8 p.m. New York time yesterday. The disturbance was moving eastward at about 15 miles (24 kilometers) per hour with almost no chance of reforming into a storm, the center said.
The failure of U.S. lawmakers to approve a budget and avert a government shutdown last week is causing concern that they won’t agree to raise the $16.7 trillion debt limit. The Obama administration has said it won’t negotiate with Republicans over funding the government or raising the ceiling, arguing that it’s part of the basic functions of Congress and shouldn’t be used as point of leverage.
“The signals are bearish for oil markets,” said Robin Mills, the head of consulting at Manaar Energy Consulting and Project Management in Dubai. “The economic signals coming out of the U.S. are bad.”
Boehner said on ABC’s “This Week” program yesterday that he doesn’t intend to let the government default.
--With assistance from Anthony DiPaola in Dubai, Ben Sharples in Melbourne and Winnie Zhu in Singapore. Editors: Raj Rajendran, Bruce Stanley