(For Bloomberg fair value curves, see CFVL <GO>.)
Oct. 22 (Bloomberg) — West Texas Intermediate crude fell below $98 a barrel on speculation that the government will report U.S. supplies rose to a three-month high. The grade’s discount to Brent was the steepest since April.
Futures dropped 1.4 percent. Inventories climbed a fifth week, according to a Bloomberg survey of analysts before the Energy Information Administration data tomorrow. Stockpiles gained 4 million barrels in the week ended Oct. 11, the agency said in a delayed report yesterday. Brent oil traded in London rose 0.3 percent on concern that a labor dispute at a Scottish refinery may curb the flow of North Sea crude.
“It looks like tomorrow’s report will show another big build in supply, which would keep the pressure on the crude market,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “The market could be trading in the low $90s before long.”
WTI crude for November delivery, which expired today, decreased $1.42 to $97.80 a barrel on the New York Mercantile Exchange, the lowest settlement since June 28. The more-active December contract dropped $1.38, or 1.4 percent, to settle at $98.30. The volume of all futures traded was 27 percent higher than the 100-day average at 4:37 p.m.
The price decline accelerated after the American Petroleum Institute reported inventories rose 3 million barrels last week. The December contract fell $1.50, or 1.5 percent, to $98.18 barrel in electronic trading at 4:36 p.m. It was at $98.21 before the report was released at 4:30 p.m.
Brent Futures
Brent oil for December settlement rose 33 cents to end the session at $109.97 a barrel on the London-based ICE Futures Europe Exchange. Volume was 5 percent lower than the 100-day average. The European benchmark traded at an $11.67 premium to WTI for the same month at today’s settle, the widest spread on a closing basis since April 15.
“The surging WTI-Brent spread seems to have put downward pressure on WTI prices,” said Stephen Schork, president of the Schork Group Inc., an energy advisory company in Villanova, Pennsylvania.
Crude inventories rose by 3 million barrels, or 0.8 percent, to 377.5 million in the week ended Oct. 18, based on the median of 10 analyst estimates in a Bloomberg survey. An advance of that size would leave stockpiles at the highest level since June 28.
The EIA, the Energy Department’s statistical arm, will release its report covering last week at 10:30 a.m. tomorrow in Washington. The EIA postponed the release of its Weekly Petroleum Status Report scheduled for Oct. 17 after a 16-day government shutdown led to the agency temporarily closing.
Market Fundamentals
“The fundamentals of the market aren’t that supportive,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “We’re looking for another sizable build in tomorrow’s report, adding to what are already ample supplies. We should see the builds continue for the next several weeks.”
Scotland is searching for buyers for the Grangemouth refinery as the site remained shut for almost a week. The refinery is supplying power and steam to BP Plc’s neighboring Kinneil processing plant, according Ineos Group Holdings SA, a Swiss-based company operating Grangemouth. Kinneil handles crude from the Forties Pipeline System, gathered from more than 80 offshore fields. The FPS pumps about 45 percent of the U.K.’s oil output.
“Brent is moving higher which is widening the spread with WTI,” Armstrong said. “There are fears that the issues at the Grangemouth refinery in Scotland could slash North Sea output.”
U.S. Payrolls
Futures climbed as much as 0.6 percent earlier as U.S. Labor Department figures showed employers added 148,000 workers in September. The median forecast of 93 economists surveyed by Bloomberg called for September payrolls to advance by 180,000. The data was delayed by the government shutdown that also spurred economists to push out expectations for the Fed to delay trimming of its quantitative-easing program.
The dollar fell as much as 0.8 percent to $1.3792 against the euro, the lowest level since November 2011. The Standard & Poor’s 500 Index rose 0.6 percent and the Dow Jones Industrial Average gained 0.5 percent.
“Equities have been reassured by the end of the government shutdown and the prospect of continuing quantitative easing, but that’s not been the case with oil,” Cooper said. “The market is under considerable technical pressure after taking out technical support in the $102-$103 area yesterday. WTI then broke through $100, which was psychologically important.”
Extending Decline
WTI may extend its slide below $100 a barrel through the end of the year as U.S. supplies surge, tensions over Iran ease and political wrangling in Washington continues, a Bloomberg survey on prices showed.
“We broke below $100 a barrel yesterday and now that’s going to be tough upside resistance,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Given inventory gains, the market has a strong bearish bias.”
Implied volatility for at-the-money WTI options expiring in December was 20.7 percent, up from 19.8 percent yesterday, according to data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 716,860 contracts as of 4:38 p.m. It totaled 665,434 contracts yesterday, 14 percent higher than the three-month average. Open interest was 1.79 million contracts, the least since July 5.
–With assistance from Grant Smith in London. Editors: Margot Habiby, Charlotte Porter
