WTI Crude Falls on U.S. Fuel Inventories; Brent Little Changed

Sep 04, 2014 8:16 am ET

(For Bloomberg fair value curves, see CFVL <GO>)

Sept. 4 (Bloomberg) -- West Texas Intermediate crude fell for the second time in three days after industry data showed fuel supplies increased in the U.S., the world’s largest oil consumer. Brent was little changed in London.

Futures dropped as much as 0.9 percent in New York. Gasoline and distillate inventories each expanded by 400,000 barrels last week, the American Petroleum Institute was said to report yesterday. Government data today is forecast to show stockpiles of the motor fuel shrank by 1.4 million barrels, according to a Bloomberg News survey. WTI’s moving averages have formed a “death cross,” a bearish chart signal.

“The API figures indicate a rise in stockpiles at the end of driving season,” Thina Saltvedt, an Oslo-based analyst at Nordea Bank AB, said today by telephone. “The market has reacted and is now waiting to see what the weekly inventories will show.”

WTI for October delivery slid as much as 89 cents to $94.65 a barrel in electronic trading on the New York Mercantile Exchange and was at $95 at 1:09 p.m. London time. The contract climbed 2.9 percent to $95.54 yesterday, the biggest gain since August 2013. The volume of all futures traded was about 6 percent below the 100-day average. Prices have decreased 3.5 percent this year.

Brent for October settlement fell 9 cents to $102.68 a barrel on the London-based ICE Futures Europe exchange. It advanced 2.4 percent yesterday. The European benchmark crude traded at a premium of $7.68 to WTI, compared with $7.23 yesterday.

Fuel Stockpiles

WTI is down 0.9 percent this week, extending a second monthly loss in August. U.S. crude inventories shrank by 500,000 barrels in the seven days ended Aug. 29, the API reported, said Bain Energy. Supplies probably fell by 1 million, according to the median estimate in the Bloomberg survey of 10 analysts before the Energy Information Administration data today.

The API in Washington 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.

WTI’s 50-day moving average, at about $99.50 a barrel today, closed below the 200-day mean yesterday for the first time since April, data compiled by Bloomberg show. Investors typically sell contracts after such a technical pattern, known as a “death cross.”

“It’s been a mixed six weeks of draws and gains on supplies” during the peak U.S. driving period that typically ends on Labor Day, said Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney. “The price volatility doesn’t justify the economics behind it.”

Ukraine Crisis

Russia’s President Vladimir Putin and his Ukraine counterpart Petro Poroshenko agreed yesterday to work on a “cease-fire regime” and take steps to end a conflict that the United Nations says has killed 2,600 people and displaced more than 1 million.

The announcement came as U.S. President Barack Obama and other leaders of the North Atlantic Treaty Organization headed to the U.K. for an annual meeting of the military bloc, which was created in 1949 in part to counter the Soviet Union. Russia is the world’s largest energy exporter.

In Libya, the group that controls the nation’s biggest oil port pledged to work with the government to keep crude flowing to international markets and defend fields against any advance by Islamist militias that seized Tripoli. Libya is a member of the Organization of Petroleum Exporting Countries.

--With assistance from Heesu Lee in Seoul.