Brent Trades Near Three-Week Low on European Demand; WTI Steady

Jun 03, 2014 8:39 am ET

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June 3 (Bloomberg) -- Brent crude traded near its lowest closing level in three weeks as economic data pointed to sluggish growth in the euro area. West Texas Intermediate was steady before weekly data on inventories.

Futures slipped as much as 0.5 percent in London. Euro- region reports today showed inflation slowed more than analysts estimated in May, while unemployment remained near a record. U.S. crude inventories probably dropped by 1 million barrels last week, according to a Bloomberg News survey before an Energy Information Administration report tomorrow. Libya’s Hariga export terminal may reopen within two days after protests prevented loadings, National Oil Corp. said yesterday.

“The physical oil market is weaker and futures are following,” Amrita Sen, chief oil market strategist at Energy Aspects Ltd. in London, said by e-mail. “European refineries are cutting runs on dire margins.”

Brent for July settlement declined as much as 51 cents, or 0.5 percent, to $108.32 a barrel on the London-based ICE Futures Europe exchange, trading for $108.45 at 1:14 p.m. local time. The grade closed at $108.83 a barrel yesterday, the lowest settlement since May 12. The European benchmark crude traded at a $6.05 premium to WTI on ICE. The spread closed at $6.36 yesterday, the narrowest in four days.

WTI for July delivery was at $102.41 a barrel in electronic trading on the New York Mercantile Exchange, down 6 cents. The contract slid 24 cents to $102.47 yesterday, the lowest close since May 20. The volume of all futures traded was 33 percent below the 100-day average for the time of day. Prices have increased 4 percent this year.

Libya Port

Euro-area inflation fell to 0.5 percent from 0.7 percent in April, the European Union’s statistics office in Luxembourg said today. The median forecast in a Bloomberg News survey of 38 economists was for a decline to 0.6 percent. The rate has been less than half the ECB’s target for eight months.

In Libya, newly-elected Prime Minister Ahmed Maiteg held his first government meeting in Tripoli yesterday, pledging to fight terrorism and restore security, according to LANA, the official news agency. The nation has become the smallest producer in the 12-member Organization of Petroleum Exporting Countries in the past year as unrest disrupted output and shipments.

The country’s Hariga and Zueitina ports are at risk of closure, Ali Al-Hasy, spokesman for the Self-declared Executive Office for the Barqa Region, said today by phone.

WTI advanced 3 percent in May, the first monthly gain since February, as crude inventories shrank at the delivery point for New York contracts. Supplies at Cushing fell to 21.7 million barrels through May 23, according to the EIA, the Energy Department’s statistical arm. That’s the lowest level since November 2008.

Summer Demand

Crude stockpiles nationwide probably decreased to about 392 million barrels in the seven days ended May 30, according to the Bloomberg survey of seven analysts. Supplies were at 399.4 million through April 25, the most since the EIA began publishing weekly data in 1982.

“We should be coming into a period of draws as we really get into this summer demand period,” said Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney who predicts investors may sell WTI contracts if prices climb to about $104.50 a barrel.

Gasoline inventories probably expanded by 200,000 barrels last week, the survey shows. The peak U.S. driving season typically starts from Memorial Day, which was on May 26, to Labor Day on Sept. 1.

Brent may extend losses after settling yesterday below technical support along its 200-day moving average, at about $109 a barrel, data compiled by Bloomberg show. Futures declined in early May after a similar pattern on April 28. Investors typically sell contracts when chart-support levels fail.

--With assistance from Ben Sharples in Melbourne.