WTI Falls to Seven-Month Low on Ample U.S. Supply; Brent Climbs

Aug 25, 2014 3:23 pm ET

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Aug. 25 (Bloomberg) -- West Texas Intermediate fell amid speculation that supplies at Cushing, Oklahoma, the delivery point for the contract, climbed a fourth week. Brent rose on concern Libyan turmoil will curb the country’s oil output.

Stockpiles at the hub rose in the week ended Aug. 22, according to four analysts surveyed by Bloomberg. CME Group Inc., the world’s largest futures market, halted most of its Globex platform for about four hours, suspending contracts including oil and commodities. Islamist militias seized the international airport in Tripoli, Libya.

“We have more than ample supplies,” Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut, said by phone. “I didn’t see any headline that spurred the move lower. It appears that it was just the fundamentals.”

WTI for October delivery declined 30 cents, or 0.3 percent, to close at $93.35 a barrel on the New York Mercantile Exchange. It was the lowest settlement since Jan. 14. The volume of all contracts traded was 54 percent below the 100-day average at 2:56 p.m. Volume totaled 385,986 contracts Aug. 22, the lowest since June 27, data compiled by Bloomberg showed.

Brent for October settlement rose 36 cents, or 0.4 percent, to end the session at $102.65 a barrel on the London-based ICE Futures Europe exchange. Volumes were 70 percent lower than the 100-day average. Prices are down 7.4 percent this year. The European benchmark oil closed at a $9.30 premium to WTI, up from $8.64 on Aug. 22.

Low Volume

“I wouldn’t add to any positions on a day with such low volume,” Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC, said by phone. “There’s a holiday in London and many people here are on vacations. The volume was low last week and should be even lower this one.”

Cushing inventories climbed 1.755 million barrels in the seven days ended Aug. 15 to 20.155 million, the Energy Information Administration’s weekly report showed Aug. 20.

The Chicago Mercantile Exchange, where the most WTI and Henry Hub natural gas benchmark contracts are traded, resumed before the start of the regular session in New York. About 500,000 crude contracts and 300,000 gas futures change hands on the bourse every day. North Sea Brent, the bellwether grade for more than half the world’s oil, is mainly transacted on ICE Futures Europe.

An alliance known as Fajr Libya, or Libya Dawn, said it wrested control of the airport from another group amid weeks of fighting that threatened to worsen security. Egyptian Foreign Minister Sameh Shoukry said unrest in Libya risks destabilizing its neighbors.

Airstrikes

Egypt and the United Arab Emirates have secretly launched airstrikes twice in the last week against Islamist-allied militias fighting for control of Tripoli, the New York Times reported, citing four unidentified senior U.S. officials.

Libyan crude production slipped to 630,000 barrels a day from 656,000 yesterday, Mohamed Elharari, a spokesman at state- run National Oil Corp., said by phone.

“The situation in Libya continues to worsen and could spiral out of control,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “Production has been picking up but it looks like things are falling apart, which is giving the market support.”

In Iraq, U.S. President Barack Obama’s bid to have Arabs take the lead in combating Islamic State suffered a setback as Sunni lawmakers quit talks on forming a new government, after Shiite gunmen killed scores of worshipers at a mosque.

Government Forces

The al-Qaeda breakaway group is also fighting government forces in Syria. It seized a Syrian air base, dislodging forces loyal to President Bashar al-Assad from their last stronghold in Raqqa province. Tabaqa was stormed after battles that began last week, said the Syrian Observatory for Human Rights, which monitors the daily developments of the civil war.

Conflict in Iraq, the second-biggest 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.

Ukraine said an armored column including 10 tanks entered from Russia today as the government in Moscow unveiled plans to send a second convoy with humanitarian aid to its neighbor’s rebel-held territory. Talks scheduled for tomorrow between the leaders of Russia and Ukraine are bringing no pause to the conflict that the United Nations says has left at least 2,000 dead since President Vladimir Putin annexed Crimea in March.

September gasoline futures increased 1.13 cents, or 0.4 percent, to settle at $2.7497 a gallon on the Nymex. Ultra low sulfur diesel for September delivery rose 0.9 cent, or 0.3 percent, to close at $2.8369 a gallon.

Gasoline pump prices fell 0.2 cent to $3.435 a gallon nationwide yesterday, the lowest since Feb. 25, according to AAA, the largest U.S. motoring group.

--With assistance from Nayla Razzouk in Dubai and Moming Zhou in New York.