(For Bloomberg fair value curves, see CFVL <GO>.)
May 14 (Bloomberg) -- West Texas Intermediate crude rose to the highest price in three weeks as a government report showed stockpiles fell at Cushing, Oklahoma, the delivery point for the futures. Brent oil rose.
WTI climbed for a third day as inventories at Cushing shrank 592,000 barrels last week and U.S. gasoline demand increased to a six-month high, the Energy Information Administration said. Brent advanced on concern that escalating tension in Ukraine will disrupt global energy supplies.
“Cushing just happens to be a focal point,” Kyle Cooper, director of commodities research at IAF Advisors in Houston, said in a phone interview. “The market wants to go higher. Petroleum demand is pretty strong.”
WTI for June delivery increased 67 cents, or 0.7 percent, to $102.37 a barrel on the New York Mercantile Exchange, the highest settlement since April 21. The volume of all futures traded was 15 percent above the 100-day average at 3:33 p.m.
Brent for June settlement, which expires tomorrow, gained 95 cents, or 0.9 percent, to $110.19 a barrel on the London- based ICE Futures Europe exchange. The more-active July contract increased 77 cents to $109.31. Volume of all contracts was 32 percent above the 100-day average.
The European benchmark crude was at a premium of $7.82 to WTI, compared with $7.54 yesterday, based on June contracts.
Cushing stockpiles dropped for the 14th time in 15 weeks, falling to 23.4 million barrels, the fewest since Dec. 5, 2008, according to the EIA, the Energy Department’s statistical arm. Stockpiles have decreased since January as the southern leg of the Keystone XL pipeline began moving oil to Gulf Coast refineries from the hub.
“It is about Cushing,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Certainly the drawdowns there continue to create some concern. It’s tight.”
Morgan Stanley said last week that the minimum operating level for Cushing storage is about 20 million barrels.
“Cushing is close to the minimum operating levels and it’s very bullish for the market,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “More people are using gasoline and demand will continue to be strong.”
There’s enough oil at Cushing to fulfill the Nymex contracts, Gary Morsches, managing director of energy products at CME Group Inc., which owns the exchange, said at Platts Global Crude Oil Summit in London.
Total petroleum consumption rose to 19.4 million barrels a day last week, the highest level since Jan. 24, the EIA said. Demand for gasoline increased to 9.19 million, the most since Nov. 1.
U.S. crude inventories increased 947,000 barrels to 398.5 million. They reached 399.4 million in the week ended April 25, the most since the EIA began reporting weekly data in 1982.
“We don’t have a shortage in crude supply,” Cooper said.
Gasoline inventories slid 772,000 barrels last week to 212.4 million, and supplies of distillate fuels, including diesel and heating oil, dropped 1.12 million to 112.9 million, the EIA said.
Ukraine “is as close to civil war as you can get” and a solution must be found that satisfies all regions, Russian Foreign Minister Sergei Lavrov said in an interview today with Bloomberg Television at the Foreign Ministry building in central Moscow. There’s a “real war” between government forces and separatist fighters in the country’s east and south, he said.
Russia, the world’s biggest energy exporter, is locked in the worst standoff since the end of the Cold War against the U.S. and Europe over Ukraine in the run-up to Ukraine’s scheduled presidential election on May 25.
“You still have the ongoing crisis in Ukraine that’s providing some background support,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.
Implied volatility for at-the-money WTI options expiring in July was 14.9 percent, unchanged from yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 520,932 contracts at 3:34 p.m. It totaled 565,924 contracts yesterday, 6.5 percent above the three-month average. Open interest was 1.63 million contracts.
--With assistance from Grant Smith in London and Barbara Powell in Houston.