WTI Crude Reaches Two-Week High on Supply Forecast; Brent Climbs

May 13, 2014 8:31 am ET

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May 13 (Bloomberg) -- West Texas Intermediate climbed to its highest intraday level in two weeks amid speculation that crude stockpiles declined again in the U.S., the world’s biggest oil consumer. Brent also gained in London.

Futures advanced as much as 85 cents in New York for a second daily gain. Crude supplies previously near a record high probably fell by 1 million barrels last week to 396.6 million, according to a Bloomberg News survey before a government report tomorrow. Stockpiles at Cushing, Oklahoma, the delivery point for New York crude futures, probably fell for a 14th time in 15 weeks, according to a separate Bloomberg survey.

“There could be further stock draws in Cushing, which will continue to support the WTI” market, Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said by e- mail.

WTI for June delivery rose to as much $101.44 a barrel in electronic trading on the New York Mercantile Exchange, the highest since April 29, and traded for $101.26 at 1:02 p.m. London time. The volume of all futures traded was about 52 percent above the 100-day average for the time of day. Prices are up 2.9 percent this year.

Brent for June settlement was 29 cents higher at $108.70 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $7.47 to WTI on ICE. It ended the session at $7.82 yesterday.

Balanced Market

The global oil market will remain “fairly balanced” this year as supply disruptions including delays at the Kashagan field in Kazakhstan prevent the build-up of a surplus, according to the monthly oil market report from the Organization of Petroleum Exporting Countries published today.

OPEC, responsible for 40 percent of the world’s oil supply, estimates it will need to provide an average of 29.8 million barrels a day this year, about 100,000 a day more than the group projected last month. OPEC raised the estimate because of lower output of natural gas liquids, the group’s Vienna-based research department said.

WTI rose 0.2 percent last week as crude supplies slid from the highest level since the Energy Information Administration began publishing weekly reports in 1982. Stockpiles fell 1.78 million barrels to 397.6 million, the first decline in five weeks, according to the Energy Department’s statistical arm.

Gasoline inventories probably rose by 300,000 barrels last week, according to the median estimate of seven analysts in the survey. Distillate stockpiles, a category that includes heating oil and diesel, increased by 1 million, the survey shows.

Crude Stockpiles

Crude supplies at Cushing, Oklahoma, the delivery point for New York futures, probably fell for a 14th time in 15 weeks, according to a separate Bloomberg survey. Stockpiles have shrunk since the southern portion of the Keystone XL pipeline began moving oil in January from the U.S. Midwest to the Gulf Coast.

“It’s encouraging to see inventories starting to come off, but the broad picture is that stockpiles remain high,” said Ric Spooner, a chief strategist at CMC Markets in Sydney, who predicts investors may sell WTI contracts if prices climb to $101.20 a barrel. “The market seems to have a fairly high tolerance toward Ukrainian news at the moment, but obviously it’s something that oil traders need to bear in mind.”

Ukraine Dispute

In Ukraine, rebels in the east of the country said they’re seeking to join Russia after disputed referendums. The government in Kiev was given a deadline to pay for Russian natural gas to prevent a supply cutoff.

Russia’s state-controlled gas monopoly, OAO Gazprom, said Ukraine must pay for next month’s supplies by June 2 or they will be shut off the next day. Gazprom will send a bill today, Chief Executive Officer Alexey Miller said yesterday at a meeting with Russian Prime Minister Dmitry Medvedev.

“The market has reversed some of its early May 10 losses as tensions over Ukraine keep it nervous,” said Andrey Kryuchenkov, London-based strategist at VTB Capital. “Upside remains limited due to plentiful supplies.”

China’s factory production rose 8.7 percent in April from a year earlier, the National Bureau of Statistics said today in Beijing, compared with the 8.9 percent median estimate of analysts surveyed by Bloomberg News. Industrial output growth slowed for the third month in March to 8.8 percent.

The country’s refiners in April processed the lowest volume of crude in three months on a per-day basis because of seasonal maintenance. China refined 39.58 million tons last month, or about 9.67 million barrels a day, according to data released today by the National Bureau of Statistics.

China will account for about 11 percent of global oil consumption this year, compared with 21 percent for the U.S., estimates from the International Energy Agency in Paris show.

--With assistance from Jing Yang in Shanghai and Ben Sharples in Melbourne.