WTI Climbs From Two-Month Low After U.S. Inventory Decline

Jul 16, 2014 9:39 am ET

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July 16 (Bloomberg) -- West Texas Intermediate oil advanced from a two-month low as U.S. crude inventories fell. Prices also rose after China’s economic growth exceeded forecasts.

U.S. crude stockpiles declined by 4.8 million barrels last week, the American Petroleum Institute was said to have reported yesterday. The Energy Information Administration is projected to report that supplies fell by 2.75 million barrels, a Bloomberg survey shows. China’s gross domestic product grew 7.5 percent from a year earlier in the second quarter, government data show.

“The supply drawdown in yesterday’s report together with recent headlines has the bulls back in the market,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “We’re expecting a good-sized change in today’s data.”

WTI for August delivery increased 67 cents, or 0.7 percent, to $100.63 a barrel at 9:30 a.m. on the New York Mercantile Exchange. It dropped to $99.96 yesterday, the lowest close since May 6. The volume of all futures traded was 14 percent above the 100-day average for the time of day.

Brent for August settlement, which expires today, slipped 23 cents to $105.79 a barrel on the London-based ICE Futures Europe exchange. Prices decreased to $106.02 yesterday, the lowest settlement since April 7. The September contract gained 25 cents, or 0.2 percent, to $107.13. Volumes were 79 percent above the 100-day average.

The European benchmark traded at a $5.16 premium to WTI, down from $6.06 yesterday.

Inventory Projections

U.S. crude inventories probably fell to 379.8 million barrels in the week ended July 11, according to the median response of 10 analysts surveyed before today’s report. Gasoline stockpiles probably rose by 950,000 barrels, while supplies of distillate fuel, a category that includes heating oil and diesel, expanded by 2 million barrels, according to the survey.

The government requires that reports be filed with the EIA, the Energy Department’s statistical arm. The industry-funded API, an industry group based in Washington, collects data on a voluntary basis from operators of refineries, bulk terminals and pipelines.

China’s GDP growth accelerated for the first time in three quarters after the government expedited spending and freed up more money for loans to counter a property slump, figures from the statistics bureau in Beijing show. A median gain of 7.4 percent was projected in a Bloomberg survey of economists. Factory output also beat estimates.

The Asian nation will account for about 11 percent of global oil demand this year, compared with 21 percent for the U.S., according to the International Energy Agency in Paris.

WTI’s decline below $100 a barrel yesterday was excessive and further losses may be unsustainable, a chart indicator shows. The 14-day relative strength index closed below 30 for the first time since Nov. 5, a level that typically signals the market is oversold. Today’s reading is about 32.6.

--With assistance from Grant Smith in London.