WTI Trades Near Four-Week High on Cushing Supplies; Brent Steady

May 20, 2014 8:50 am ET

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May 20 (Bloomberg) -- West Texas Intermediate traded near a four-week high amid speculation that crude supplies will shrink further at Cushing, the biggest U.S. oil-storage hub. Brent was steady in London after Libya’s government offered concessions to defuse renewed tensions.

Futures were little changed in New York after rising 0.6 percent yesterday. Total U.S. crude inventories were unchanged after increasing five of the last six weeks, a Bloomberg News survey shows. A rogue general in eastern Libya, whose forces attempted to dissolve the parliament in Tripoli, gained support among soldiers and some separatist groups.

“The U.S. recovery is gaining ground and that is positive for energy demand, and it’s drawing on inventories,” Jens Naervig Pedersen, a commodities analyst at Danske Bank A/S, said by phone from Copenhagen. “Demand is picking up and that is positive for prices.”

WTI for June delivery was at $102.56 a barrel in electronic trading on the New York Mercantile Exchange, down 5 cents, at 1:33 p.m. London time. The contract, which expires today, climbed 59 cents to $102.61 yesterday, the highest close since April 21. The volume of all futures traded was about 4.5 percent above the 100-day average for the time of day. The more-active July contract added 5 cents to $102.16.

Brent for July settlement was 7 cents lower at $109.30 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $7.16 to WTI on ICE for the same month. The spread narrowed for a second day yesterday to close at $7.26.

Cushing Stockpiles

WTI slid for a second month in April as U.S. crude inventories expanded to a record 399.4 million barrels, the highest level since the Energy Information Administration began publishing weekly data in 1982. Supplies were probably at 398.5 million barrels in the week ended May 16, according to the median estimate in a Bloomberg survey of seven analysts.

“If we get draws in crude during the lead-up to drive time, that might provide some solid support,” said Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, who predicts investors may sell WTI if futures advance to $104 a barrel.

Stockpiles at Cushing, Oklahoma, declined to 23.4 million barrels in the seven days through May 9, said the EIA, the Energy Department’s statistical arm. That’s the least since December 2008. Supplies have decreased as the southern leg of the Keystone XL pipeline began moving oil to Gulf Coast refineries from storage in January. The U.S. is the world’s largest oil consumer.

Russian Exercises

“Falling Cushing stockpiles are giving a general upward push in oil, and if they continue to drop prices will be further supported,” Will Yun, a commodities analyst at Hyundai Futures Co. in Seoul, said by phone today. “Ukraine remains unresolved, which will have a continuous impact on the market.”

Russian President Vladimir Putin yesterday ordered forces in the Rostov, Belgorod and Bryansk regions bordering Ukraine to return to their bases after completing exercises, according to the presidential press service. Officials from the U.S. and the North Atlantic Treaty Organization said they saw no immediate evidence of a withdrawal, echoing previous cases where Russia has promised to pull back troops from the border, most recently two weeks ago.

After annexing Crimea in March, Russia has been accused by the government in Kiev and its U.S. and European Union allies of fomenting unrest in the mostly Russian-speaking east of Ukraine. Putin has softened his rhetoric in recent days, welcoming contacts last week between the authorities in Kiev and supporters of a decentralization of powers to the regions.

Libya Clashes

Rebels who hold ports in eastern Libya, where they’ve been blocking oil exports since July, expressed support for Khalifa Haftar, the retired military leader who heads a self-proclaimed National Army. Haftar is seeking to shut down the country’s parliament and crush armed Islamist groups.

He threatened to arrest and send to trial senior ranking members of Libya’s General National Congress, government officials and Muslim Brotherhood members on charges of crimes against the Libyan people, in an interview with the London-based Asharq al-Awsat newspaper published today.

In a bid to defuse tensions, the interim government proposed yesterday to hold a vote for a new prime minister, pass a budget and then halt work to allow for elections, according to a statement on the Cabinet website.

“The situation is still a mess there,” Pedersen said. “We shouldn’t be too optimistic that Libya will succeed in restarting production.”

Libya is pumping 210,000 barrels a day, Mohamed Elharari, a spokesman for the National Oil Corp., said today. That’s down more than 80 percent from a year earlier, data compiled by Bloomberg show.

--With assistance from Maher Chmaytelli in Dubai and Heesu Lee in Seoul.