Brent Rebounds From 14-Month Low on Speculation Losses Excessive

Aug 20, 2014 8:58 am ET

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Aug. 20 (Bloomberg) -- Brent crude rebounded from its lowest closing level in 14 months amid speculation that losses have been excessive amid risks to Middle Eastern supply. West Texas Intermediate was steady before U.S. inventory data.

Brent futures advanced as much as 0.8 percent in London, having lost 5.2 percent in the past month. Iraqi security forces stepped up attacks against Islamic State militants after ousting fighters from the country’s largest dam with U.S. air support. Crude stockpiles in the U.S. probably dropped by 1.75 million barrels while gasoline and distillate supplies shrank for a third week, a Bloomberg News survey shows before an Energy Information Administration report.

“It would take extraordinary circumstances to drive prices lower on a sustained basis,” David Wech, an analyst at consultants JBC Energy GmbH in Vienna, said in a report. “We thus see prices slowly recovering over the coming months to levels back above $105.”

Brent for October settlement climbed as much as 81 cents to $102.37 a barrel on the London-based ICE Futures Europe exchange and traded for $101.87 at 1:24 p.m. local time. The volume of all futures traded was about 29 percent above the 100-day average for the time of day. Brent settled at $101.56 yesterday, the weakest since June 25, 2013. It reached a premium of $9.13 to WTI, the most on an intraday basis since June 19.

WTI for October delivery, the U.S. benchmark’s most active contract today, was at $93.14 a barrel in electronic trading on the New York Mercantile Exchange, up 28 cents. The September contract, which expires today, rose as much as $1.77 to $96.25. Front-month prices have declined 3.2 percent this year.

Fuel Supplies

Brent is “taking a breather after recent losses,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in a report. “Today, market participants will be paying some attention to the U.S. weekly fuel inventory numbers.”

Crude stockpiles slid by 1.4 million barrels in the week ended Aug. 15, the American Petroleum Institute in Washington reported yesterday, according to Bain Energy. Supplies at Cushing, Oklahoma, the delivery point for WTI contracts and the biggest U.S. oil-storage hub, expanded by 1.7 million, data from the industry group was said to show.

The API collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines, while the government requires that reports be filed with the EIA, the Energy Department’s statistical arm.

Gasoline inventories probably decreased by 1.55 million barrels last week, according to the median estimate in the Bloomberg survey of 10 analysts. Distillate stockpiles, including heating oil and diesel, are forecast to have fallen by 300,000 barrels.

Iraq Conflict

Iraqi troops, joined with Kurdish fighters and backed by U.S. warplanes, are seeking to reverse gains by insurgents who have rampaged through the north of the country since capturing the city of Mosul in June. About 50 Islamic State vehicles were destroyed and 100 militants killed in three days of air strikes, Faleh al-Issawi, the deputy head of Anbar provincial council in the west, said yesterday.

The conflict in Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, has largely spared the south, home to about three-quarters of its crude output. The nation pumped 3 million barrels a day last month, data compiled by Bloomberg show.

--With assistance from Ben Sharples in Melbourne.