(For Bloomberg fair value curves, see CFVL <GO>.)
Oct. 23 (Bloomberg) -- West Texas Intermediate crude fell to the lowest level in almost four months as supplies rose more than expected in the U.S., the biggest oil-consuming country.
Prices dropped 1.5 percent. Crude inventories climbed 5.25 million barrels last week, the Energy Information Administration said. Analysts surveyed by Bloomberg estimated a gain of 3 million. Stockpiles at Cushing, Oklahoma, increased for a second week and domestic production jumped to the most in 24 years.
“The report adds up to a pretty bearish signal to the market,” said Julius Walker, global energy markets strategist at UBS Securities LLC in New York who forecast WTI will average $95 this quarter. “The striking thing is another Cushing build in addition to the total U.S. build. Fundamentals are gradually easing.”
WTI for December delivery slid $1.44 to $96.86 a barrel on the New York Mercantile Exchange, the lowest settlement since June 28. The volume of all futures traded was 22 percent more than the 100-day average for the time of day at 3:28 p.m. Prices have tumbled 5.3 percent since Oct. 16.
Brent for December settlement declined $2.17, or 2 percent, to $107.80 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded was 41 percent above the 100-day average. WTI’s discount to Brent narrowed to $10.94 from $11.67 yesterday. It widened to $13.37 earlier, the most in six months on an intraday basis.
U.S. crude supplies rose to 379.8 million barrels last week, the most since June 28, according to the EIA, the Energy Department’s statistical arm. They have climbed 24.2 million barrels, or 6.8 percent, in the last five weeks.
“Fundamentally, it’s a weak market for WTI,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “Everything points to lower prices.”
Stockpiles at Cushing, the delivery point for WTI futures, increased 358,000 barrels to 33.3 million. Supplies at the hub dropped in the 14 weeks ended Oct. 4, the longest streak since EIA began publishing data from Cushing in 2004, as improved pipeline networks and rail moved more oil to Gulf Coast refineries.
“The bottleneck there is not fully resolved, and crude is backing up in the Cushing area again,” Walker said.
U.S. crude production grew 6.3 percent last week to 7.9 million barrels a day, the most since March 1989. A combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies in shale formations in North Dakota, Texas and other states.
“People are starting to realize that it’s hard to be bullish, given the rising inventory levels,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
Gasoline stockpiles fell 0.8 percent to 215.5 million barrels and distillate fuels, including heating oil and diesel, climbed 1.2 percent to 125.8 million.
Refineries operated at 85.9 percent of capacity, the lowest level in almost six months. Total petroleum demand dropped 3.8 percent to 18.3 million barrels a day. The four-week average was 18.7 million, a 17-week low.
Crude stockpiles in China, the second-largest consuming country after the U.S., rose to a record in September, based on data going back to January 2010.
Commercially held supplies increased 1.4 percent from August, according to a report today from China Oil, Gas & Petrochemicals, a newsletter published by the official Xinhua News Agency. That’s 32.4 million metric tons, or 237.6 million barrels, Bloomberg calculations based on the data show.
The Asian nation accounted for 11 percent of global oil consumption this year, compared with 21 percent for the U.S., according to the International Energy Agency.
“The market is really pricing in the well-supplied fundamentals in the U.S. and China,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago.
Iraq, the second-largest oil producer in the Organization of Petroleum Exporting Countries, reiterated plans to boost crude output and exports by the end of the year as demand from Asian buyers strengthens.
Production will rise to 3.5 million barrels a day by the end of December and increase further in 2014, Oil Minister Abdul Kareem al-Luaibi told reporters in Baghdad today. Iraq’s output is about 3.3 million barrels a day, Deputy Prime Minister Hussain Al-Shahristani said a week ago.
Implied volatility for at-the-money WTI options expiring in December was 22.1 percent, up from 20.5 percent yesterday, according to data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 673,878 contracts as of 3:28 p.m. It totaled 774,795 contracts yesterday, 33 percent higher than the three-month average. Open interest was 1.79 million contracts.
--With assistance from Mark Shenk in New York and Khalid Al- Ansary in Baghdad. Editors: Margot Habiby, Dan Stets