(For Bloomberg fair value curves, see CFVL <GO>)
Dec. 18 (Bloomberg) -- Brent crude traded near its lowest closing price in almost a month before the Federal Reserve’s decision on a possible reduction of stimulus in the world’s biggest oil consumer.
Futures lost as much as 0.6 percent in London. The Fed will disclose its plans today for its $85 billion monthly bond buying program after a two-day meeting in Washington. U.S. crude stockpiles fell by 2.5 million barrels last week, the American Petroleum Institute said yesterday. An Energy Information Administration report today is forecast to show supplies dropped by 3 million, according to a Bloomberg News survey.
“Everybody is watching the Fed and that’s the main driver at the moment,” Hans van Cleef, an energy economist at ABN Amro Bank NV in Amsterdam, said by telephone. “The market is well- balanced at the moment and I don’t see that changing at all in 2014. Demand will pick up due to the economic recovery, but supply will pick up as well.”
Brent for February settlement slid as much as 64 cents to $107.80 a barrel and was at $108.50 as of 12:53 p.m. London time on the ICE Futures Europe exchange. It closed at $108.44 yesterday, the lowest settlement since Nov. 20. The European benchmark was at a $10.92 premium to West Texas Intermediate for the same month. The spread was $10.78 yesterday, the narrowest based on closing prices since Nov. 8.
WTI for January delivery, which expires tomorrow, rose 9 cents to $97.31 a barrel in electronic trading on the New York Mercantile Exchange. The more-active February contract increased 11 cents to $97.58. The volume of all futures traded was about 50 percent less than the 100-day average for this time of day, according to data compiled by Bloomberg.
Gasoline supplies fell by 481,000 barrels last week, the API in Washington said. The EIA report may show an increase of 1.5 million, according to the median estimate of nine analysts in the Bloomberg survey. Distillate stockpiles, including heating oil and diesel, dropped by 434,000 barrels. They are projected to remain unchanged in the survey.
The API collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA.
The U.S. central bank will maintain its Treasuries buying at $45 billion a month, according to the median estimate of 67 economists compiled by Bloomberg. Purchases of mortgage-backed securities will also be left unchanged, at $40 billion, the survey showed. About 34 percent of economists surveyed by Bloomberg on Dec. 6 predicted that the Fed will start paring bond buying this month, up from 17 percent in a Nov. 8 poll.
“Markets are focused on the Fed decision,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “Refining has been running at a high rate, and there appears to be a lot of finished product in the system.” The EIA numbers will be closely watched by investors, he said.
--Editors: Raj Rajendran, Sharon Lindores