WTI Crude Gains on Factory Orders, Narrowing Discount to Brent

Jun 03, 2014 4:04 pm ET

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June 3 (Bloomberg) -- West Texas Intermediate advanced on speculation that inventories declined at Cushing, Oklahoma, and on growth in U.S. factory orders. WTI’s trading range was the tightest in almost eight years.

The U.S. benchmark climbed from a two-week low. Supplies at the delivery point for WTI futures dropped for a 17th time in 18 weeks in the seven days ended May 30, according to five analysts surveyed by Bloomberg before a government report tomorrow. U.S. April factory orders gained 0.7 percent, the Census Bureau reported. WTI narrowed the discount to Brent, which fell on concern a weaker European economy will reduce demand and as Libya production gained.

“There is increasing anxiety over the storage situation at Cushing,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. He said European data “points to a struggling economy.”

WTI for July delivery gained 19 cents to end at $102.66 a barrel on the New York Mercantile Exchange on volume that was 31 percent below the 100-day average for the time of day. The price ranged from $102.23 to $102.81 at 3:23 p.m. The 58-cent difference was the smallest since July 3, 2006.

Brent for July settlement declined 1 cent to $108.82 a barrel on the London-based ICE Futures Europe exchange. Trading was 7.9 percent above the 100-day average. WTI traded at a $6.16 discount to Brent, the narrowest in a week. The price ranged from $108.32 to $108.98.

Cushing Supplies

Supplies at Cushing have decreased as the southern leg of the Keystone XL pipeline began moving oil to Gulf Coast refineries from the hub in January. Stockpiles fell to a five- year low of 21.7 million barrels in the week ended May 23, according to the Energy Information Administration.

“If Cushing drops as expected, which seems reasonable, then we’ll see WTI stronger,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “It seems like the U.S. economy is getting better.”

The EIA, the Energy Department’s statistical arm, is scheduled to release last week’s inventory data tomorrow. Total crude supplies may have dropped 250,000 barrels, according to a Bloomberg survey of 10 analysts. Refineries may have boosted their operating rate by 0.5 percentage point, the survey showed.

Brent fell as the euro-region unemployment rate reached 11.7 percent in April, near the record 12 percent, Luxembourg- based Eurostat reported.

Libyan Output

Libya’s oil output rose to 162,000 barrels a day, Mohamed Elharari, a spokesman for National Oil Corp., said today. Production rose from yesterday’s 156,000 barrels as protests at the Zelten and Raguba oil fields in the Sirte area of central Libya ended, Elharari said.

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.

“We are seeing a weak fundamental picture,” Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut, said by phone. “More Libyan oil is coming online and it’s weighing on the market.”