WTI Slips From Four-Week High Before Supply Data, Fed Decision

Jan 29, 2014 8:00 am ET

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Jan. 29 (Bloomberg) -- West Texas Intermediate retreated from the highest price in four weeks before U.S. government data forecast to show crude inventories rose and the Federal Reserve’s decision on the pace of monetary stimulus.

Futures slipped as much as 0.7 percent in New York. Crude stockpiles probably increased by 2.25 million barrels last week, according to a Bloomberg News survey before an Energy Information Administration report today. Inventories advanced by 4.75 million barrels, the industry-funded American Petroleum Institute said yesterday. The Fed, concluding a two-day meeting today, will probably agree to keep scaling back bond purchases, a Bloomberg survey showed.

“Market participants are all awaiting the two important events of the day, U.S. oil inventories and the Fed statement,” said Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark. “Given the continuously cold temperatures, a build on crude and gasoline and a draw on distillate should be expected. The Fed statement will likely be a non-event.”

WTI for March delivery fell as much as 63 cents to $96.78 a barrel in electronic trading on the New York Mercantile Exchange, and was at $97.19 as of 12:58 p.m. London time. The contract climbed $1.69 to $97.41 yesterday, the highest close since Dec. 31. The volume of all futures traded was in line with the 100-day average.

Brent for March settlement dropped as much as 48 cents, or 0.5 percent, to $106.93 a barrel on the London-based ICE Futures Europe exchange. Brent on ICE was at a premium of $10.43 a barrel to WTI contracts on the exchange, compared with $10 yesterday.

Buzzard Restarts

Brent fell earlier as the North Sea Buzzard oil field restarted. The 200,000 barrel-a-day Buzzard field began the process of restarting early this morning after a halt on Jan. 27, said one person with knowledge of the matter who asked not to be identified. Buzzard feeds into the Forties blend, one of four grades that make up the Dated Brent benchmark used to price more than half the world’s crude. An official at Nexen Inc., Buzzard’s operator, in Aberdeen declined to comment.

Emerging Markets

Prices swung between gains and losses after Turkey’s central bank raised all its main interest rates at an emergency late-night meeting in an effort to shore up the lira. India unexpectedly increased rates yesterday and Brazil has pushed its benchmark higher for six straight meetings.

The Federal Reserve decided at its December gathering to begin cutting its monthly bond buying by $10 billion to $75 billion, and will probably reduce purchases in $10 billion increments over the next six meetings before announcing an end to the program no later than December, according to a Bloomberg survey this month.

WTI rose 2.4 percent last week as stockpiles of distillate declined amid colder weather in North America that boosted demand for heating fuel. The U.S. is getting another blast of Arctic air this week, the National Weather Service said.

U.S. distillate supplies, a category that includes heating oil and diesel, fell by 1.79 million barrels last week, the API said yesterday. Data from the EIA is forecast to show stockpiles shrank by 2.55 million, according to the median estimate of 10 analysts in the survey.

Gasoline inventories gained 363,000 barrels, the API said. The report from the EIA, the Energy Department’s statistical arm, is projected to show they increased by 1.6 million, according to the survey.

The API in Washington collects supply information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA for its weekly survey.

Today’s price pullback “might be reflecting a hint of caution among the oil bulls ahead of the inventory numbers” from the EIA, Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone today. “It’s not surprising that some are already locking in gains.”

--With assistance from Ramsey Al-Rikabi in Singapore. Editors: Raj Rajendran, Dan Weeks