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Dec. 31 (Bloomberg) -- West Texas Intermediate fell, trimming the fourth annual increase in five years, before a government report that may show fuel inventories grew last week.
Prices slid for a second day after reaching $100 for the first time in two months Dec. 27. Supplies of gasoline and distillates rose by 2.13 million barrels last week, the Energy Information Administration may say on Jan. 3, according to a Bloomberg survey. Crude stockpiles are near a record high for this time of year.
“A lot of crude has been refined but not consumed,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “It helped build product inventories. The market has a bearish bias on it after last week’s rally.”
WTI for February delivery dropped 87 cents, or 0.9 percent, to settle at $98.42 a barrel on the New York Mercantile Exchange. Trading was less than half the 100-day average at 4:41 p.m. Prices increased 6.1 percent in December, slid 3.8 percent in the fourth quarter and rose 7.2 percent in 2013.
Prices were little changed after the American Petroleum Institute reported U.S. crude inventories fell 5.67 million barrels last week. WTI slid 65 cents, or 0.7 percent, to $98.64 a barrel in electronic trading at 4:41 p.m. It was $98.61 before the report was released at 4:30 p.m.
Brent for February settlement declined 41 cents, or 0.4 percent, to $110.80 a barrel on the London-based ICE Futures Europe exchange. Volume was 65 percent below the 100-day average. The grade, which rose 1 percent this month and 2.2 percent this quarter, declined 0.3 percent in 2013. The European crude’s premium to WTI ended the year at $12.38, down from $19.29 at the end of 2012.
Gasoline stockpiles probably rose 1.38 million barrels to 221.2 million last week, the survey showed. That would leave supplies at the highest level since Aug. 9. Inventories of distillate fuel advanced 750,000 barrels to 114.9 million.
The refinery utilization rate was probably unchanged at 92.7 percent of capacity, the highest level since July 12, according to the survey. The increasing operating rate boosted production of gasoline to 9.72 million barrels a day in the week ended Dec. 20, the highest level in EIA data going back to 1982.
“We’ve been seeing refinery runs unseasonably high and that’s taking a lot of crude inventories,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “Trading volume is thin. We are not seeing a lot of interest in the market and that’s keeping prices lower. People are taking profit from last week’s run up above $100.”
Crude inventories decreased by 2.83 million barrels to 364.7 million in the week ended Dec. 27, according to the survey. Supplies were at 367.6 million on Dec. 20, the second- highest level for mid-December in more than 30 years of data. They reached a seasonal record last year.
Oil 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.
“Prices are declining as we end the year,” said Tim Evans, an energy analyst at Citi Futures in New York. “This looks like some book squaring on light volume.”
Brent dropped as Libya’s state-run National Oil Corp. said the Messla field has restored output to 25,000 barrels a day. Nationwide protests have hampered crude production in the holder of Africa’s largest oil reserves.
Libya’s decline to 210,000 barrels a day from the 2013 high of 1.4 million helped reduce output from the Organization of Petroleum Exporting Countries to a two-year low. OPEC’s December production was 29.955 million barrels a day, a Bloomberg survey of oil companies, producers and analysts showed.
WTI rose this month as signs of economic growth spurred speculation that demand will strengthen. Consumer confidence in the U.S. climbed more than projected in December to the highest level since April 2008, according to the Conference Board. The New York-based private research group said its index rose to 78.1 from a revised 72 a month earlier that was stronger than initially estimated.
“I think 2014 is going to be a year of demand,” Larry said. “If the economy continues to grow like this, we’ll see higher demand numbers in the new year.”
Implied volatility for at-the-money WTI options expiring in February was 15.9 percent, up from 14.5 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 236,320 contracts at 4:41 p.m. It totaled 279,621 contracts yesterday, 48 percent below the three-month average. Open interest was 1.62 million contracts.
--With assistance from Mark Shenk in New York. Editors: Richard Stubbe, Bill Banker