WTI Oil Falls on Ample U.S. Crude Supply; Brent Trades Near $110

May 20, 2014 5:18 pm ET

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May 20 (Bloomberg) -- West Texas Intermediate crude slipped from a four-week high on speculation that U.S. inventories are adequate to meet demand from refineries making gasoline for the peak-demand summer months. Brent traded near $110 a barrel.

Futures fell 17 cents in New York. A government report tomorrow will probably show that U.S. crude supplies were unchanged near a record last week, according to a Bloomberg survey. WTI has increased relative to other grades this year as the opening of the southern leg of the Keystone XL pipeline in January caused stockpiles to tumble at Cushing, Oklahoma, the delivery point for the contract. The link moves oil from the hub to refineries on the Gulf Coast.

“The market is waiting on tomorrow’s inventory data,” Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said by phone. “We’ve seen prices rise on the drop in Cushing stocks, but they have just moved elsewhere. There’s plenty of crude around.”

WTI for June delivery settled at $102.44 a barrel on the New York Mercantile Exchange, the first decline in three days. The contract, which expired today, climbed 59 cents to $102.61 yesterday, the highest close since April 21. The more-active July contract gained 22 cents to $102.33.

Prices rose after the American Petroleum Institute said U.S. supplies fell 10.3 million barrels last week. July WTI gained 72 cents, or 0.7 percent, to $102.83 at 4:36 p.m. in electronic trading in New York. Prices were $102.46 before the report was released at 4:30 p.m.

Brent Trading

Brent for July settlement advanced 32 cents, or 0.3 percent, to end the session at $109.69 a barrel on the London- based ICE Futures Europe exchange. The European benchmark grade traded at a $7.36 premium to WTI futures for the same month.

U.S. crude inventories probably held at 398.5 million in the week ended May 16, according to the median estimate in a Bloomberg survey of nine analysts. They expanded to 399.4 million barrels as of April 25, the highest level since the Energy Information Administration began publishing weekly data in 1982.

Stockpiles at Cushing fell to 23.4 million barrels in the seven days through May 9, the EIA, the Energy Department’s statistical arm, reported last week. That’s the least since December 2008.

WTI contracts for the months following June climbed today amid speculation crude demand will rise as U.S. refineries bolster fuel output with the summer vacation season approaching.

Refinery Activity

The EIA will probably report that refineries operated at 89.3 percent of capacity last week, up 0.5 percentage point from May 9, according to the survey. Operating rates usually increase in late spring and have peaked in July during the past five years.

“Refiners are finally through with maintenance and are preparing for summer,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “We’re going to see refinery operations go higher from here.”

Brent oil climbed for the first time in three days. The North Sea crude, which is used to price more than half of the world’s oil and, unlike WTI, can be exported, is often more sensitive to changes to the global supply-and-demand balance.

A rogue general in Libya who’s confronting Islamist militias and seeking to shut down the country’s parliament gained backing in the east among both soldiers and some separatist groups. Rebels who hold ports in eastern Libya, blocking oil exports since July, expressed support for Khalifa Haftar, the head of the self-proclaimed National Army.

The North African country has struggled to restore security three years after a revolt that toppled leader Muammar Qaddafi. Oil output fell to 215,000 barrels a day in April, about 14 percent of capacity, data compiled by Bloomberg show.

“Things in Libya are falling apart,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “There appears to be a complete breakdown of authority.”

--With assistance from Grant Smith and Lananh Nguyen in London.