(For Bloomberg fair value curves, see CFVL <GO>.)
Dec. 30 (Bloomberg) -- West Texas Intermediate crude slipped below $100 a barrel on speculation prices rose more than justified last week and with U.S. inventories near a record high for this time of the year.
Futures dropped the most in two weeks, paring the biggest monthly gain since July, after rising six of the previous seven sessions to a two-month high of $100.32 on Dec. 27. Energy Information Administration data showed stockpiles at the second- highest level for mid-December in more than 30 years of data. Brent dropped as Libya resumed production in a field.
“The market was really rallying last week and now we are coming down to earth,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The market got ahead of itself. U.S. inventories are still at a pretty high level.”
WTI for February dropped $1.03, or 1 percent, to close at $99.29 a barrel on the New York Mercantile Exchange. It ended at $100.32 on Dec. 27, the highest settlement since Oct. 18. Trading was 48 percent below the 100-day average at 3:24 p.m. Prices have climbed 7.1 percent this month and 8.1 percent in 2013, set for a fourth annual gain in five years.
Brent for February settlement slid 97 cents, or 0.9 percent, to $111.21 a barrel on the London-based ICE Futures Europe exchange. Trading was 50 percent below the 100-day average. The European benchmark crude was at a premium of $11.92 to WTI.
“I don’t think you could have any discovery of new directions in a market with volume this low,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “People are squaring up positions and waiting for the new year to start.”
Crude inventories dropped 4.73 million barrels to 367.6 million in the week ended Dec. 20, the EIA said on Dec. 27. Supplies in the Gulf Coast area, known as PADD 3, decreased 5.14 million. Total supplies reached 371.1 million on Dec. 21, 2012, a record seasonal high.
Stockpiles have fallen every December since 2005. Companies in Gulf Coast states usually delay imports and minimize supplies at the end of the year to reduce local taxes.
Petroleum consumption slid 2.4 percent in the week ended Dec. 20 to 20.5 million barrels a day, the EIA said. Production of gasoline surged by 4.3 percent to 9.72 million, the highest level in the EIA weekly data.
The agency released its weekly petroleum report two days later than usual because of Christmas. It will next report oil inventories and demand levels on Jan. 3, also delayed because of the New Year’s Day holiday.
“Nobody knows what’s going to happen when people come back from the holidays, so better be safe than sorry and put some money into the pocket,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.
Oil also slipped as contracts to purchase previously owned U.S. homes rose less than forecast in November. A gauge of pending home sales increased 0.2 percent, the National Association of Realtors said today. The median projection in a Bloomberg survey of economists called for a 1 percent advance.
“Demand is not there yet and the economy isn’t that strong,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “You are seeing a little bit of profit taking from the rally last week.”
Brent fell as Libya’s National Oil Corp. said it resumed production from the Messla field. A possible agreement with rebels to reopen the nation’s port of Hariga collapsed, the oil ministry said Dec. 28.
Libya’s Tobruk and Sarir refineries also resumed operation yesterday, the state-owned NOC said on its website, citing Arabian Gulf Oil Co.’s Mohamed Bin Shatwan.
Nationwide protests have hampered crude production in the holder of Africa’s largest oil reserves. Output dropped to 210,000 barrels a day in November, the least since September 2011, according to data compiled by Bloomberg.
Implied volatility for at-the-money WTI options expiring in February was 14.5 percent, up from 13.7 percent on Dec. 27, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 240,901 contracts at 2:36 p.m. It totaled 288,558 contracts on Dec. 27, 46 percent below the three-month average. Open interest was 1.62 million contracts.
--Editors: Richard Stubbe, Charlotte Porter