WTI Trades Near One-Week High as Stockpiles Decline, Fed Tapers

Dec 19, 2013 8:32 am ET

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Dec. 19 (Bloomberg) -- West Texas Intermediate traded near the highest price in a week after crude stockpiles declined in the U.S. and the Federal Reserve said it will reduce stimulus as the nation’s economic outlook improves.

Futures were little changed in New York, after rising 0.6 percent yesterday, while Brent advanced as much as 0.7 percent in London. U.S. crude inventories shrank by 2.94 million barrels in the seven days ended Dec. 13, falling for a third week, according to data yesterday from the Energy Information Administration. The Fed is trimming its monthly bond purchases to $75 billion from $85 billion, starting in January, amid greater job-market prospects, Chairman Ben S. Bernanke said.

“Oil prices went up yesterday on growth optimism,” said Bjarne Schieldrop, chief commodity analyst at SEB AB in Oslo. “We’re continuing to see solid implied crude demand in the U.S. The message from the Fed is that of course they will not go cold turkey on the U.S. economic recovery.”

WTI for January delivery, which expires today, was at $97.83 a barrel, up 3 cents, in electronic trading on the New York Mercantile Exchange at 1:11 p.m. London time. It climbed 58 cents to $97.80 yesterday, the highest settlement since Dec. 10. The more-active February contract gained 8 cents to $98.14. The volume of all futures traded was about 58 percent below the 100- day average. Prices are up 6.6 percent this year.

Brent for February settlement climbed 62 cents to $110.25 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $12.06 to WTI for the same month, compared with $11.42 yesterday.

Less Stimulus

Bernanke, in the final weeks of his eight-year tenure, is curtailing the purchases that swelled the Fed’s balance sheet to almost $4 trillion as he sought to put millions of jobless Americans back to work. The policy has raised concern that it risked inflating asset-price bubbles even as the economic benefits started to wane.

The Fed’s purchases will be divided between $40 billion in Treasuries and $35 billion in mortgage bonds, Bernanke said at a news conference yesterday after a meeting of the Federal Open Market Committee. The jobless rate fell to 7 percent in November, a five-year low, as employers added a greater-than- forecast 203,000 workers to payrolls.

Fed’s Endorsement

“The Fed has given an endorsement to the growth that’s coming through with this decision,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney who predicts investors may sell WTI contracts between $98 and $98.50 a barrel. “From a technical point of view, West Texas is bumping up against resistance.”

The U.S. is the world’s largest oil consumer and will account for about 21 percent of global demand this year, according to the International Energy Agency, a Paris-based adviser to developed nations.

Crude stockpiles at Cushing, Oklahoma, the biggest U.S. oil-storage hub and the delivery point for WTI futures, declined by 600,000 barrels to 40.6 million in the week ended Dec. 13, the EIA data show. Total crude supplies were forecast to fall by 3.5 million, according to the median estimate of nine analysts in a Bloomberg News survey.

--Editors: Bruce Stanley, Stephen Voss