WTI Crude Reaches Highest Since October on Cushing Inventories

Feb 12, 2014 3:20 pm ET

(For Bloomberg fair value curves, see CFVL <GO>.)

Feb. 12 (Bloomberg) -- West Texas Intermediate crude advanced to the highest level in almost four months after the government reported that inventories at Cushing, Oklahoma, decreased last week.

Prices rose for the sixth time in seven days. Supplies at Cushing, the delivery point for the futures, shrank by 2.67 million barrels, the Energy Information Administration reported. Stockpiles declined as the southern leg of TransCanada Corp.’s Keystone XL pipeline moved oil to the Gulf Coast. WTI reduced gains as total U.S. crude supplies rose more than expected.

“We’re seeing the bottlenecks between Cushing and the Gulf Coast being alleviated, which is supportive for WTI,” said Adam Wise, who helps run a $6 billion oil and gas bond portfolio as a managing director at Manulife Asset Management in Boston. “The crude number was a little higher than expected, which tempered some of the earlier gains.”

WTI for March delivery advanced 43 cents, or 0.4 percent, to $100.37 a barrel on the New York Mercantile Exchange, the highest settlement level since Oct. 18. The volume of all futures was 50 percent above the 100-day average.

Brent for March settlement climbed 11 cents to end the session at $108.79 a barrel on the London-based ICE Futures Europe exchange. The European benchmark’s premium over WTI dropped to $8.42 from $8.74.

Cushing supplies dropped to 37.6 million barrels, the lowest level since Nov. 1, the Energy Department’s statistical arm reported. The decline was the largest since July 5.

Keystone Pipeline

The southern portion of the Keystone XL link began moving oil to the Texas Gulf Coast from Cushing last month. The line was initially flowing at 288,000 barrels a day and will ramp up over the course of the year toward the 700,000-barrel capacity, executives said in a Jan. 22 press conference at the company’s headquarters in Calgary.

“There is a lot of focus on this report because of Keystone and Cushing,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “The path of least resistance is higher.”

U.S. inventories of crude oil climbed by 3.27 million barrels to 361.4 million, the EIA said. Analysts surveyed by Bloomberg expected a gain of 2.6 million. Imports jumped 1.04 million barrels a day to 7.93 million.

Supplies of distillate fuel, including heating oil and diesel, decreased by 731,000 barrels to 113.1 million.

Demand Slips

Oil demand fell for a second week, down 569,000 barrels a day to 18.5 million. Domestic production of crude oil increased 88,000 barrels a day to 8.13 million.

“We still have a lot of oil here,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “Everybody is looking at Cushing because of the Keystone pipeline.”

WTI also rose as China imported a record volume of crude in January. Overseas purchases of crude increased about 12 percent from a year ago to 28.15 million metric tons, according to data on the website of the General Administration of Customs today. That’s about 6.66 million barrels a day, 5.2 percent more than the previous record of 6.33 million in December.

“We have positive indications that Chinese crude-oil imports set another record,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Crude’s rally marches on.”

Implied volatility for at-the-money WTI options expiring in April was 17.6 percent, up from 17.5 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 665,783 contracts at 2:38 p.m. It totaled 573,137 contracts yesterday, 13 percent above the three-month average. Open interest was 1.65 million contracts, the most since Dec. 13.

--Editors: Richard Stubbe, Dan Stets