(For Bloomberg fair value curves, see CFVL <GO>.)
Jan. 29 (Bloomberg) -- West Texas Intermediate crude declined as a government report showed U.S. crude inventories rose more than expected last week.
Futures fell 5 cents after settling at a four-week high yesterday. The Energy Information Administration reported stockpiles climbed 6.42 million barrels, the most in three months. WTI rebounded from an intraday drop of 1.1 percent as demand for distillate fuel, which includes heating oil, reached the highest level in almost six years amid cold weather.
“Today’s price has to be keyed on the EIA report and the fact that there is a build in crude inventories,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “The drop in distillate is very significant.”
WTI for March delivery fell 5 cents to settle at $97.36 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 17 percent lower than the 100-day average.
Brent for March settlement increased 44 cents, or 0.4 percent, to $107.85 on the London-based ICE Futures Europe exchange. Volume was 11 percent below the 100-day average. Brent was at a premium of $10.49 a barrel to WTI, compared with $10 yesterday.
Crude inventories rose to 357.6 million barrels, the EIA report showed. The gain almost tripled the 2.25 million-barrel advance that was the median forecast of analysts surveyed by Bloomberg.
“Crude inventories are rising and that points to a weak fundamental picture,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
Inventories of distillates dropped for a third consecutive week, down 4.58 million barrels to 116.2 million. Gasoline supplies slipped 819,000 to 234.4 million after four consecutive increases. Analysts in the survey expected distillates to fall 2.55 million and gasoline to rise 1.6 million.
Distillate demand surged 20 percent to 4.52 million barrels a day amid cold weather, the highest level since February 2008, the EIA data showed. It was the third gain in a row. Gasoline consumption rose 6.5 percent to 8.58 million.
“The major focus is in distillate and the pickup in product demand,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago.
January is on track to be the coldest month of the century in the lower 48 states, Commodity Weather Group LLC said. About 25 percent of households in the U.S. Northeast use heating oil to warm their houses, according to the EIA, the Energy Department’s statistical unit.
“Demand is so high because of the ultra-cold weather,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Crude is not going straight down because of the strong demand for products.”
Ultra low sulfur diesel, a proxy for heating oil, advanced 1.9 percent to $3.1816 a gallon on the Nymex. Gasoline futures rallied 1.3 percent to $2.6609. Natural gas, another heating fuel, jumped 10 percent to $5.557 per million British thermal units, the highest settlement in four years.
WTI also followed declines in U.S. equities as the Federal Reserve reduced its monthly bond buying by $10 billion to $65 billion a month, sticking to its plan for a gradual withdrawal from departing Chairman Ben S. Bernanke’s unprecedented easing policy. The decision was announced at 2 p.m., 30 minutes before the close of floor trading on the Nymex. The Standard & Poor’s 500 Index dropped 1.1 percent at 3:01 p.m.
“You have to accept the fact that the $10 billion reduction was expected,” Finlon said.
Implied volatility for at-the-money WTI options expiring in March was 20.1 percent versus 20 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 372,110 contracts at 2:44 p.m. It totaled 444,915 contracts yesterday, the lowest level of 2014. Open interest was 1.59 million contracts.
--Editors: Richard Stubbe, Dan Stets