WTI Trades Near Two-Month Low on Ample U.S. Supply; Brent Rises

Jul 14, 2014 3:57 pm ET

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July 14 (Bloomberg) -- West Texas Intermediate oil settled near a two-month low amid ample U.S. supplies. Brent climbed as fighting continued in Iraq and Ukraine said Russia was boosting support for rebels.

Crude supplies at Cushing, Oklahoma, the delivery point for WTI traded in New York, and fuel stockpiles nationwide rose in the week ended July 4, the Energy Information Administration said July 9.

“Supplies are quite high,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Cushing isn’t the only place that matters. If you look elsewhere there are ample supplies available.”

WTI for August delivery rose 8 cents to settle at $100.91 a barrel on the New York Mercantile Exchange. Futures earlier touched $100.22, the lowest level since May 12. The grade has advanced 2.5 percent this year.

Brent for August settlement climbed 32 cents, or 0.3 percent, to end the session at $106.98 a barrel on the London- based ICE Futures Europe exchange. The contract reached $106.21, the lowest intraday level since April 8. Prices are down 3.4 percent this year.

The European benchmark closed at a $6.07 premium to WTI, up from $5.83 on July 11.

Technical Resistance

WTI has traded below its 100-day moving average, which stands at $102.44 a barrel today, since July 9, data compiled by Bloomberg show. The 200-day moving average stands at $99.93 and was last breached in May. Investors typically sell contracts when prices slip below chart-resistance levels.

“WTI is very close to breaching $100 and then the 200-day moving average,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “There’s a lot of resistance there. If there’s a breakthrough prices should fall quite a bit more.”

The 14-day relative strength index reached 29.54 today, the lowest reading since January, according to data compiled by Bloomberg. An RSI below 30 typically signals a market is oversold.

“An RSI below 30 is the definition of an oversold market,” Yawger said.

Gasoline stockpiles rose 579,000 barrels to 214.3 million in the week ended July 4, EIA figures show. Supplies of distillate fuel, a category that includes heating oil and diesel, increased 227,000 barrels to 121.8 million, the highest level since January.

Fuel Consumption

U.S. fuel consumption slipped 1 percent to 19.2 million barrels a day in the week ended July 4, EIA data showed. Gasoline demand fell 2.5 percent to 8.94 million barrels a day.

“There’s product demand weakness, particularly for gasoline, judging from last week’s data,” said Mike Wittner, the head of oil market research at Societe Generale SA in New York. “There should be erosion in refinery margin, which will reduce crude demand.”

Gasoline for August delivery rose 1.66 cents, or 0.6 percent, to $2.9251 a gallon on the Nymex. Ultra low sulfur diesel for August delivery increased 1.2 cents, or 0.4 percent, to $2.8729.

U.S. gasoline pump prices fell 0.3 cent to $3.614 a gallon nationwide yesterday, the lowest since April 9, according to AAA, the largest U.S. motoring group.

In Iraq, fighting remains concentrated in the north, where militants from a breakaway al-Qaeda group known as the Islamic State captured the city of Mosul last month. The conflict hasn’t spread to the south, the source of more than three-quarters of the country’s oil output.

Correction Due

“Prices have fallen more than they rose when the trouble erupted in Iraq, so we’re due for a correction,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “Iraq remains OPEC’s second-largest oil producer, which makes it very important.”

Fighting between Ukrainian forces and pro-Russian separatists has intensified since President Petro Poroshenko called off a cease-fire July 1.

Brent fell as much as 0.4 percent earlier as rebels committed to keep two harbors in eastern Libya open and as ships prepared to load oil. Fighters seeking self-rule in the eastern region said they will follow through with an agreement to reopen Es Sider, the country’s biggest oil port. Es Sider has the capacity to load 340,000 barrels a day, the Oil Ministry said.

Production from the country climbed to 470,000 barrels a day, state-run National Oil Corp. spokesman Mohamed Elharari said by phone in Tripoli yesterday. The nation pumped 300,000 barrels a day in June, ranking it as the smallest producer in the Organization of Petroleum Exporting Countries, data compiled by Bloomberg show.

--With assistance from Grant Smith in London.