WTI Crude Falls to Four-Week Low on U.S. Supplies; Brent Slips

Apr 30, 2014 3:41 pm ET

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

April 30 (Bloomberg) -- West Texas Intermediate crude tumbled to a four-week low after government data showed U.S. inventories extended a record high.

Prices dropped for the first time in three days. Supplies gained 1.7 million barrels to 399.4 million in the seven days ended April 25, the most since the Energy Information Administration began reporting weekly data in 1982. WTI also slid as U.S. economic growth stalled in the first quarter. The U.S. grade widened its discount to Brent.

“There’s a massive amount of crude in the U.S.,” said Adam Wise, who helps run a $6 billion oil and gas bond portfolio as a managing director at Manulife Asset Management in Boston. “This has the potential of being very bearish for the U.S. crude market.”

WTI for June delivery fell $1.54, or 1.5 percent, to $99.74 a barrel on the New York Mercantile Exchange, the lowest settlement since April 2. The volume of all futures traded was 15 percent above the 100-day average at 3:19 p.m. WTI dropped 1.8 percent in April, the most in five months.

Brent for June settlement slid 91 cents, or 0.8 percent, to $108.07 a barrel on the London-based ICE Futures Europe exchange. It gained 36 cents this month. Volume was near the 100-day average. The European benchmark crude traded at a premium of $8.33 to WTI, compared with $7.70 yesterday.

Record Stockpiles

“People are having a knee-jerk reaction to the inventory report,” said Paul Crovo, a Philadelphia-based oil analyst at PNC Capital Advisors. “You are also seeing some pushbacks because the GDP number is so weak.”

Last week’s inventory increase was smaller than the 2.2 million gain forecast by analysts surveyed by Bloomberg. In monthly data, supplies were higher in 1931. Imports dropped 313,000 barrels a day, helping reduce U.S. supplies.

U.S. crude production slid 8,000 barrels a day to 8.35 million, near the highest level since 1988, the 8.36 million reached in the prior week.

“Ample supplies are starting to weigh on the market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We have a lot of oil here in the U.S.”

Cushing Stockpiles

Stockpiles in the Gulf Coast, known as PADD 3, rose to 215.3 million barrels, the most since EIA data for the region started in 1990. Supplies there have been growing since January as the southern leg of the Keystone XL pipeline began moving oil to Gulf Coast refineries from Cushing, Oklahoma.

Inventories at Cushing, the delivery point for WTI futures, slid 612,000 barrels last week to 25.4 million. The refinery utilization rate stayed at 91 percent, the highest level since January. Petroleum consumption climbed 798,000 barrels a day to 18.8 million, the strongest since March.

“The market is not only about supply, but also about demand outlook and refinery runs,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.

U.S. gross domestic product grew at a 0.1 percent annualized rate in the first quarter amid harsh winter weather, the Commerce Department reported today. That’s slower than a 2.6 percent gain in the prior period. A Bloomberg survey of economists predicted a 1.2 percent expansion.

“The market’s now focusing on supplies,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The U.S. growth number is very disappointing.”

Implied volatility for at-the-money WTI options expiring in June was 17.7 percent, up from 17.5 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 516,175 contracts at 3:21 p.m. It totaled 450,367 contracts yesterday, 16 percent below the three-month average. Open interest was 1.65 million contracts.