WTI Falls a Second Day on U.S. Fuel Inventories; Brent Declines

Jun 05, 2014 8:38 am ET

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June 5 (Bloomberg) -- West Texas Intermediate fell for a second day after inventories of gasoline and distillate fuels increased in the U.S., the world’s biggest oil consumer. Brent slipped as the European Central Bank cut its deposit rate below zero.

Futures dropped as much as 0.5 percent in New York. Gasoline stockpiles increased by 210,000 barrels to 211.8 million in the seven days ended May 30, while distillate inventories, including heating oil and diesel, climbed by 2.01 million barrels to 118.1 million, the Energy Information Administration reported yesterday. The ECB said it would implement further measures as policy makers try to counter the prospect of deflation.

“An overall bearish picture resulted from total hydrocarbon stocks increasing,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said in a report. “The door is still open for a short-term correction in prompt WTI, possibly below $100.”

WTI for July delivery declined as much as 52 cents to $102.12 a barrel in electronic trading on the New York Mercantile Exchange and was at $102.27 at 1:11 p.m. London time. The volume of all futures traded was 34 percent below the 100- day average for the time of day. Prices are up 3.9 percent this year.

Brent for July settlement decreased as much as 54 cents, or 0.5 percent, to $107.86 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $5.68 to WTI on ICE. The spread closed at $5.76 yesterday, the narrowest since April 15.

Fuel Demand

Crude supplies shrank by 3.43 million barrels to 389.5 million last week, the Energy Information Administration reported yesterday. They were at 399.4 million through April 25, the most since the Energy Department’s statistical arm started publishing weekly data in 1982.

“There’s still concern that the market is oversupplied,” said Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, who predicts investors may buy WTI contracts if prices fall to about $102 a barrel. “If oil can’t move higher on draws at the beginning of the drive-time season, then what will it move higher on?”

Gasoline Supply

Gasoline supplied to wholesalers, a proxy for demand, slid 2.2 percent to 9.1 million barrels a day last week, the EIA said. The peak U.S. driving season typically starts from Memorial Day, which was on May 26, to Labor Day on Sept. 1. Prices at the pump may decline through the end of June as demand slows, according to a forecast by AAA, the largest U.S. motoring group. Total fuel consumption was down 977,000 barrels a day, the biggest drop since December.

WTI has technical support along its 50-day moving average, at about $102 a barrel today, data compiled by Bloomberg show. Buy orders tend to be clustered around chart-support levels.

ECB President Mario Draghi reduced the deposit rate to minus 0.10 percent from zero, making the institution the world’s first major central bank to use a negative rate. Policy makers also lowered the benchmark rate to 0.15 percent from 0.25 percent. Draghi started a press conference at 2:30 p.m. in Frankfurt.