(For Bloomberg fair value curves, see CFVL <GO>)
Sept. 4 (Bloomberg) -- West Texas Intermediate crude fell after a government report showed that U.S. refineries reduced operating rates as the peak driving season came to an end.
Refineries operated at 93.3 percent of their capacity last week, down 0.2 percentage point from Aug. 22, according to the Energy Information Administration. Refiners schedule maintenance for September and October as they transition to winter from summer fuels. The euro tumbled against the dollar after the European Central Bank cut rates and announced stimulus.
“The market is dominated by the fundamentals,” Mike Wittner, the head of oil market research at Societe Generale SA in New York, said by phone. “Refiners in the U.S. are going into maintenance, which is going to reduce demand for crude here and weigh on WTI. We could see WTI fall relative to Brent in the months ahead because of U.S. maintenance.”
WTI for October delivery dropped $1.09, or 1.1 percent, to close at $94.45 a barrel on the New York Mercantile Exchange. Futures settled at $92.88 on Sept. 2, the lowest settlement since Jan. 14. Prices have decreased 4 percent this year.
Brent for October settlement slipped 94 cents, or 0.9 percent, to end the session at $101.83 a barrel on the London- based ICE Futures Europe exchange. The European benchmark crude closed at a $7.38 premium to WTI, up from $7.23 yesterday.
Crude supplies declined 905,000 barrels to 359.6 million in the week ended Aug. 29, the report showed. Inventories were projected to fall by 1 million barrels, according to the median of 10 analysts surveyed by Bloomberg.
Supplies of crude at Cushing, Oklahoma, the delivery point for WTI traded in New York, fell by 385,000 barrels to 20.3 million last week, data from the EIA showed. It was the first decline in five weeks.
Gasoline inventories slid 2.32 million barrels to 210 million, the lowest level this year, according to the EIA, the Energy Department’s statistical arm. Stockpiles of distillate fuel, a category that includes diesel and heating oil, rose by 605,000 barrels to 123.4 million.
Consumption of gasoline rose 4.2 percent to 9.48 million barrels a day, the highest level since July 2010, according to the EIA.
“The gasoline draw was very bullish,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “The demand number was very strong as well.”
October gasoline futures declined 2.01 cents, or 0.8 percent, to settle at $2.5999 a gallon on the Nymex. Ultra low sulfur diesel for October delivery fell 2.95 cents, or 1 percent, to $2.8363 a gallon.
Gasoline pump prices fell 0.1 cent to $3.432 a gallon nationwide yesterday, according to AAA, the largest U.S. motoring group.
The euro dropped to the lowest level in more than a year against the dollar. A weaker euro and stronger U.S. currency reduce the appeal of dollar-denominated raw materials as an investment.
“Today’s move is all about the soaring dollar,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.6 billion, said by phone. “The rising dollar is weighing on commodities as a whole, especially oil.”
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.
The North African country is pumping 725,000 barrels a day, compared with 300,000 barrels a day in June, according to data compiled by Bloomberg. Daily output should increase to 800,000 barrels at the end of the month, and to 1 million barrels by year-end, Libya’s Acting Oil Minister Omar Shakmak said by phone from Benghazi on Sept. 1.
“Libyan production is up, which is also weighing on the market,” Wittner said. “The political situation is far from stable but they have been able to get above 700,000 barrels a day and they are aiming for 1 million by the end of the year.”
Russian 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 met in 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.
Obama and U.K. Prime Minister David Cameron sought to win support among NATO allies to stave off the advance of Islamic State militants in Iraq and Syria. WTI reached a nine-month high in June as the militants advanced across vast swathes of northern Iraq.
“The market is ignoring several geopolitical problem spots right now,” Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut, said by phone.