WTI Oil Falls as U.S. Crude Supplies Seen Rising; Brent Gains

Mar 25, 2014 4:42 pm ET

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March 25 (Bloomberg) -- West Texas Intermediate crude dropped on speculation that a government report tomorrow will show that U.S. supplies climbed a 10th week and as the Houston Ship Channel opened for limited traffic. Brent rose.

WTI fell 0.4 percent. Inventories advanced 2.5 million barrels last week, according to analysts surveyed by Bloomberg before tomorrow’s Energy Information Administration data. Fuel stockpiles probably decreased in the seven days ended March 21 as refineries performed seasonal maintenance. The closing of the Houston Ship Channel after an oil spill prompted Exxon Mobil Corp. to curb operating rates at its Baytown, Texas, refinery.

“We should see another substantial build in crude oil supplies tomorrow,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “We are at a time of year where supplies are expected to gain. If they manage to open up the ship channel soon, we will probably see another big inventory gain next week.”

WTI for May delivery declined 41 cents to settle at $99.19 a barrel on the New York Mercantile Exchange. It was the lowest close since March 17. The volume of all futures traded was 16 percent below the 100-day average at 4:36 p.m.

Prices were little changed from the settlement after the American Petroleum Institute reported U.S. crude inventories rose 6.28 million barrels last week. WTI futures fell 43 cents, or 0.4 percent, to $99.17 at 4:36 p.m. in electronic trading. Prices were $99.31 before the report was released at 4:30 p.m.

Brent Increase

Brent for May settlement rose 18 cents to end the session at $106.99 a barrel on the London-based ICE Futures Europe exchange. The volume of all contracts was 25 percent lower than the 100-day average. The European benchmark crude closed at a $7.80 premium to WTI.

Gasoline inventories probably declined 1.6 million barrels in the week ended March 21, according to the median of 10 analyst responses in the Bloomberg survey. The EIA, the Energy Department’s statistical arm, will report that stockpiles of distillate fuel, a category that includes heating oil and diesel, fell 1.24 million barrels.

Vessel Traffic Services now is accepting outbound ships from Houston and Galveston, according to U.S. Coast Guard Watch Supervisor B. Wear. The 4,000-barrel spill of bunker fuel caused by a collision on March 22 forced the closing of the channel, home to 11 percent of U.S. refining capacity.

Sanction Threats

Brent rose after Group of Seven leaders said yesterday that they’re ready to intensify actions, including coordinated sanctions that would have “an increasingly significant impact” on Russia’s economy. Russia is the world’s biggest energy exporter. Brent, which is used to price more than half of the world’s crude and, unlike WTI, can be exported, is often more sensitive to changes to the global supply-and-demand balance.

“We’re all keeping an eye on Russia and what if any impact the G-7 meeting will have on the crisis,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $115 billion of assets.

U.S. President Barack Obama urged Russian President Vladimir Putin to de-escalate the crisis over Ukraine or face the consequences in a speech today.

Putin “has to understand that there’s a choice to be made here,” Obama told a news conference after a 53-nation nuclear- security summit in The Hague today, saying there’s “another path open” to the Russian leader. “It is now up to Russia to act responsibly and show itself once again willing to abide by international rules and international norms.”

Implied volatility for at-the-money WTI options expiring in May was 17.4 percent, little changed from yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 386,064 contracts at 4:37 p.m. It totaled 291,684 contracts yesterday, 44 percent below the three-month average and the lowest level since Dec. 31. Open interest was 1.6 million contracts.