WTI Drops a Third Day as OPEC Boosts Output to Five-Month High

By Ben Sharples

West Texas Intermediate crude fell for a third day, the longest run of declines in four weeks, as OPEC boosted output to the highest level in five months.

WTI futures slid as much as 1 percent in New York, and London-traded Brent decreased for a second day. The Organization of Petroleum Exporting Countries produced 30.46 million barrels a day last month, up from 30.18 million in March, the group’s secretariat said May 10. That’s the most since November. Saudi Arabia, the group’s biggest exporter, welcomes additional supplies from other producers that may help to stabilize prices, according to Oil Minister Ali Al-Naimi.

“Crude at these levels is expensive,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. “It’s all about supply. When you look at inventory levels around the world it isn’t really warranted” for WTI to be at this level, he said, predicting investors may buy New York crude at around $92.50 a barrel.

WTI for June delivery dropped as much as 97 cents to $95.07 a barrel in electronic trading on the New York Mercantile Exchange and was at $95.28 at 2:21 p.m. Singapore time. The volume of all contracts traded was 5 percent above the 100-day average. Futures declined 35 cents to $96.04 on May 10.

Brent for June settlement lost as much as 84 cents, or 0.8 percent, to $103.07 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $7.93 to WTI futures, from $7.87 on May 10. The spread closed at $7.72 on May 8, the narrowest since January 2011.

Saudi Output

Saudi Arabia pumped 9.27 million barrels a day in April, up from 9.13 million in March, OPEC’s Vienna-based secretariat said May 10 in its monthly Oil Market Report. That’s the highest since November and compares with the country’s own figure of 9.31 million barrels, based on its communication with the 12-member group.

The kingdom “remains committed to its role as a stable and reliable supplier” that has consistently increased production to offset shortfalls, Al-Naimi said May 10 in Istanbul, where he traveled to meet Turkey’s energy minister, Taner Yildiz.

“Brent a little over $100 a barrel seems reasonable for the short term,” said Robin Mills, the head of consulting at Dubai-based Manaar Energy Consulting and Project Management. “In the long term, it’s set to come down a little.”

Chinese Factories

China’s industrial production climbed 9.3 percent in April from a year earlier, data today from the National Bureau of Statistics in Beijing showed. That’s below the median estimate of 9.4 percent in a Bloomberg News survey of 38 economists. The country is the world’s second-largest oil consumer and accounted for 11 percent of global demand in 2011, according to BP Plc (BP/)’s Statistical Review of World Energy.

WTI has technical support along its 100-day moving average, about $93.53 a barrel today, according to data compiled by Bloomberg. Futures on May 10 halted an intraday drop near this indicator, signaling it’s where buy orders may be clustered.

Net-long positions in WTI held by money managers, including hedge funds, commodity pools and trading advisers, increased in the seven days ended May 7, according to the U.S. Commodity Futures Trading Commission. They rose by 10,572 futures and options combined, or 5.5 percent, to 204,534, the regulator said in its Commitments of Traders report on May 10.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

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