(For Bloomberg fair value curves, see CFVL <GO>)
Aug. 20 (Bloomberg) -- West Texas Intermediate crude rose for the first time in three days as U.S. inventories dropped more than expected. Front-month futures widened their premium over the second month as the September contract expired.
Stockpiles decreased by 4.47 million barrels in the week ended Aug. 15, the Energy Information Administration, the Energy Department’s statistical arm, said in a weekly report. Analysts surveyed by Bloomberg had expected a drop of 1.75 million. The refinery utilization rate rose for the first time in five weeks.
“This was well in excess of what folks thought the draw would be,” said Adam Wise, who helps run a $6 billion oil and gas bond portfolio as a managing director at John Hancock in Boston. “Refinery activity was up pretty significantly, which increased crude demand and prices are responding appropriately.”
The more actively-traded October WTI futures gained 59 cents, or 0.6 percent, to end at $93.45 a barrel on the New York Mercantile Exchange. The September contract rose 1.7 percent to $96.07. The volume of all futures was 34 percent below the 100- day average.
The September-October futures spread widened to $2.62 on the Nymex from yesterday’s $1.62. It reached $2.66 on Aug. 18, the highest since 2008.
Brent for October settlement climbed 72 cents, or 0.7 percent to $102.28 a barrel on the London-based ICE Futures Europe exchange. Volume was 22 percent below the 100-day average. It reached a premium of $8.83 to October WTI on the ICE.
Crude supplies declined to 362.5 million barrels, the lowest level since February, the EIA said. Gasoline stockpiles rose 585,000 and distillate fuels, including diesel and heating oil, fell 960,000.
Analysts in the Bloomberg survey had expected gasoline supplies to drop 1.55 million and distillates to decrease 300,000.
Supplies at Cushing, Oklahoma, the delivery point for WTI contracts and the biggest U.S. oil-storage hub, rose 1.76 million to 20.2 million.
“Crude stocks are down, which would be bullish for oil in general,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas. “We had a big gain in stocks at Cushing. That’s really negative for WTI.”
Inventories at the hub have risen for three weeks as a fire shut down CVR Energy Inc.’s refinery in Coffeyville, Kansas on July 29. That plant uses supplies from Cushing. The 115,000- barrel-a-day refinery is restarting operations and is expected to be online Aug. 27, according to Sara Belfry, communications director of the Kansas Department of Health and Environment.
The refinery utilization rate increased to 93.4 percent last week, up from 91.6 percent, the EIA said.
“The key to the stats is the utilization rate climbing 1.8 percentage points,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC.
WTI and Brent have declined this month as Iraqi security forces stepped up attacks against Islamic State militants after ousting fighters from the country’s largest dam with U.S. air support.
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.
“Prices have fallen a great deal recently because news from the Middle East and Russia/Ukraine has been rather subdued,” Wise said. “Those situations remain very volatile. A flare-up of tension could send us right back to the highs.”