WTI Crude Rises a Third Day as U.S. Chill Erodes Fuel Stockpiles

Feb 06, 2014 8:54 am ET

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Feb. 6 (Bloomberg) -- West Texas Intermediate crude advanced for a third day after a U.S. government report showed distillate stockpiles shrank as freezing weather boosted demand for heating fuels.

Futures gained as much as 1.2 percent in New York. Distillate supplies, including heating oil and diesel, fell by 2.36 million barrels to 113.8 million in the seven days ended Jan. 31, data from the Energy Information Administration showed yesterday. A second winter storm of the week swept into the Northeast, dumping snow as temperatures dropped. The U.S. is the world’s biggest oil consumer.

“It’s mostly due to cold weather and high demand in heating oil in the U.S.,” Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich, said by phone. “Sooner or later it will come down but I wouldn’t bet on falling oil prices in the coming days.”

WTI for March delivery rose as much as $1.12 to $98.50 a barrel in electronic trading on the New York Mercantile Exchange and traded for $98.03 as of 1:48 p.m. London time. The contract rose 19 cents to $97.38 yesterday, the highest close since Jan. 31. The volume of all futures traded was 2 percent less than the 100-day average.

Brent for March settlement gained as much as $1.05 to $107.30 a barrel on the London-based ICE Futures Europe exchange. The European crude was at a premium of $8.94 to WTI on the ICE exchange. The spread closed at $8.87 yesterday.

Heating Demand

Prices reached today’s intraday high as European equities advanced before a meeting of the European Central Bank. The ECB kept interest rates unchanged. Mario Draghi, its president, reiterated that the bank will take action if the outlook for inflation worsens or money-market turbulence resumes.

WTI has advanced the past three weeks as U.S. distillate demand expanded and inventories declined amid arctic weather. East Coast diesel surged to a record premium against New York- traded futures as restrictions on natural gas pipelines boosted consumption of heating oil.

Gasoline stockpiles increased by 505,000 barrels last week, said the EIA, the Energy Department’s statistical arm. Supplies were forecast to gain by 1.15 million, according to the median estimate in a Bloomberg News survey.

Crude inventories rose by 440,000 barrels, less than the lowest projection of the 10 analysts in the survey. Refinery utilization slid by 2.1 percentage points to an average 86.1 percent of capacity, the EIA said.

“The cold weather is an ongoing feature and the inventory report helped oil to hold the line at current levels,” said Ric Spooner, a chief analyst at CMC Markets in Sydney who predicts investors may sell at about $99.33 a barrel. “Inventories are coming in a bit better than expected.”

WTI’s climb may stall along its 100-day moving average, data compiled by Bloomberg show. Futures have halted advances the past week near this indicator at about $97.76 today. Sell orders tend to be clustered around technical-resistance levels. The 200-day mean is at $99.34.

--With assistance from Ben Sharples in Melbourne. Editors: Raj Rajendran, Alaric Nightingale