WTI Crude Falls as U.S. Refiners Slow Operations, Curbing Demand

Sep 04, 2014 12:05 pm ET

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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 $1.07, or 1.1 percent, to $94.47 a barrel at 11:35 a.m. on the New York Mercantile Exchange. Futures settled at $92.88 on Sept. 2, the lowest settlement since Jan. 14. The volume of all futures traded was 8.7 percent above the 100-day average for this time of day.

Brent for October settlement slipped 77 cents, or 0.8 percent, to $102 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $7.53 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.

Cushing Stockpiles

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. Supplies were projected to fall by 1.4 million barrels, according to the Bloomberg survey.

Stockpiles of distillate fuel, a category that includes diesel and heating oil, rose by 605,000 barrels to 123.4 million. Analysts surveyed by Bloomberg projected a 1 million- barrel decline.

October gasoline futures slipped 0.21 cent to $2.6179 a gallon on the Nymex. Ultra low sulfur diesel for October delivery fell 1.31 cents, or 0.5 percent, to $2.8526 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.

Currency Moves

The euro dropped to the lowest level in more than a year against the dollar. The common currency fell as much as 1.5 percent. 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.”

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 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.