WTI Heads for Weekly Drop as Refiners Slow Rates; Brent Steady

Sep 05, 2014 2:59 am ET

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

Sept. 5 (Bloomberg) -- West Texas Intermediate headed for a weekly decline as refineries reduced operating rates at the end of the peak gasoline season in the U.S., the world’s biggest oil consumer. Brent was steady in London.

Futures were little changed in New York and down 1.3 percent since Aug. 29. Refineries operated at 93.3 percent of capacity last week, down 0.2 percentage points, according to the Energy Information Administration. Processing plants schedule maintenance in September and October as a transition to making winter-grade fuels. Libya’s crude production was steady at 725,000 barrels a day, National Oil Corp. said.

“Lower demand is certainly the base-case scenario, but it’s unlikely the sellers will get too aggressive,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone today. “Firstly, we start to move into the hurricane season in the U.S. and secondly, peak demand for oil occurs over the northern hemisphere winter. We could see softness, but I’d be surprised if we see any aggressive sell-down.”

WTI for October delivery was at $94.72 a barrel in electronic trading on the New York Mercantile Exchange, up 27 cents, at 2:56 p.m. Singapore time. The contract fell 1.1 percent to $94.45 yesterday. The volume of all futures traded was about 35 percent below the 100-day average. Prices have dropped 3.8 percent this year.

Brent for October settlement was 22 cents higher at $102.05 a barrel on the London-based ICE Futures Europe exchange. Prices have slid 1.1 percent this week. The European benchmark crude traded at a premium of $7.27 to WTI, up from $7.23 on Aug. 29.

Fuel Stockpiles

U.S. gasoline inventories shrank by 2.32 million barrels to about 210 million last week, the EIA reported yesterday. Supplies were projected to decline by 1.4 million, according to the median estimate in a Bloomberg News survey of 11 analysts. The country’s peak summer driving season, which started on Memorial Day in May, typically ends on Labor Day, which was on Sept. 1.

Distillate stockpiles, includes heating oil and diesel, expanded by 605,000 barrels to 123.4 million, said the EIA, the Energy Department’s statistical arm. A decrease of 1 million was forecast in the survey.

Crude supplies fell by 905,000 barrels to 359.6 million, compared with a projected 1 million drop. Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the largest U.S. oil- storage hub, were down 385,000 barrels at 20.3 million.

Hurricane Norbert

WTI may extend losses next week amid ample U.S. supply, a separate Bloomberg survey shows. Thirteen of 30 analysts, or 43 percent, predict prices will decline through Sept. 12, while 30 percent of respondents forecast an increase.

Hurricane Norbert is moving toward Mexico’s Baja California Sur after strengthening in the Pacific Ocean, according to the U.S. National Hurricane Center. The storm packed top winds of 90 miles (145 kilometers) per hour as it moved north-northwest at 8 mph, the center said on its website at 11 p.m. Pacific time yesterday.