(For Bloomberg fair value curves, see CFVL <GO>)
Feb. 18 (Bloomberg) -- West Texas Intermediate crude rose for the first time in three sessions amid speculation that cold weather in the U.S. will boost fuel demand in the world’s biggest oil consumer.
Futures climbed as much as 1.2 percent from the settlement on Feb. 14. Floor trading in New York was closed yesterday for the Presidents Day holiday in the U.S. A winter storm passing through the nation’s Midwest may bring more snow to the Northeast and Mid-Atlantic today, bolstering the use of heating fuels. Distillate inventories fell to 113.1 million barrels in the five weeks through Feb. 7, the lowest level since November, data from the Energy Information Administration show.
“Winter weather is really still having some impact on prices because demand remains elevated compared to what otherwise would have been expected at this time of the year,” Ole Hansen, the head of commodity strategy at Saxo Bank A/S in Copenhagen, said by phone. “We are still looking for the potential upsides above $100 for WTI and $110 for Brent. We are seeing some selling around these levels.”
WTI for March delivery increased as much as $1.19 to $101.49 a barrel in electronic trading on the New York Mercantile Exchange, and was at $101.35 at 1:43 p.m. London time. The contract advanced 0.4 percent last week for a fifth week of gains. Yesterday’s transactions will be booked today for settlement purposes. Prices are up 2.9 percent this year.
Brent for April settlement traded 65 cents higher from yesterday at $109.83 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade was at a premium of $8.63 to WTI for the same month. The spread was $8.95 on Feb. 14, the widest in a week based on closing prices.
“The weather, together with more bullish economic headlines, mean the short-term risk for oil is to the upside,” said Gordon Kwan, the regional head of oil and gas research at Nomura Holdings Inc. in Hong Kong. “It will be at least spring until we see a meaningful drift down in prices.”
The latest snowstorm headed for the eastern U.S. may drop as much as 8 inches (20 centimeters) in Chicago today, according to the National Weather Service and AccuWeather.com in State College, Pennsylvania.
The system has already canceled more than 1,000 flights and left thousands in Illinois without power. New York City may get 3 to 5 inches, with most of the accumulation during the morning rush hour before the storm switches over to rain. Boston may also receive 5 inches.
Heating oil futures for March delivery increased as much as 1.4 percent to $3.12 a gallon in New York, extending a third day of gains.
“Demand for heating oil will continue to be steady,” Ken Hasegawa, an energy trading manager at Newedge Group in Tokyo, said by phone. “It’s a supportive factor for WTI.”
Crude from Africa and the Caspian Sea should be added to the Brent oil benchmark to make up for declining North Sea production, according to Ian Taylor, the chief executive officer of Vitol Group, the largest independent oil trader.
Dated Brent, used to price more than half the world’s crude, is becoming less effective because North Sea output is dwindling and much of what remains is being shipped to Asia, he said at an industry event in London yesterday.
Oil may climb this year because of supply disruptions in Libya, Nigeria and other countries and as consumption in developed economies expands more than forecast, Taylor said.
“Disruptions in Libya and the North Sea are lending some support to Brent, but overall the market is reasonably well supplied,” Saxo Bank’s Hansen said.
WTI’s advance may stall as a technical indicator approaches a level that will signal further gains can’t be sustained. The 14-day relative strength index is at about 69 today, the highest reading since July 23, data compiled by Bloomberg show. Investors typically sell contracts when the RSI climbs above 70, which shows the market is overbought.
--With assistance from Ann Koh and Ramsey Al-Rikabi in Singapore and Ben Sharples in Melbourne. Editors: Bruce Stanley, John Deane