WTI Crude Fluctuates Near Four-Month Low as U.S. Supplies Drop

By Ben Sharples 

West Texas Intermediate crude fluctuated near the lowest level in almost four months. An industry report showed U.S. stockpiles fell the most this year.

Futures swung between gains and losses in New York after reaching a technical support level. The American Petroleum Institute said U.S. crude stockpiles slid 6.7 million barrels last week, the most since the seven days ended Dec. 28 and the first decline in four weeks. A government report today may show supplies rose 1.2 million barrels to the highest level in 22 years, according to a Bloomberg survey. The International Monetary Fund cut its global economic growth forecast for 2013.

“The recovery in WTI at this stage could only be defined as a correction from a technical point of view,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The general overall picture remains of moderate growth, and that was outlined by the IMF when it pared its growth estimates.”

WTI for May delivery was at $88.62 a barrel, down 10 cents, in electronic trading on the New York Mercantile Exchange at 1:42 p.m. Sydney time. The volume of all futures traded was 11 percent above the 100-day average. The contract increased 1 cent yesterday after closing at $88.71 on April 15, the lowest since Dec. 24. Prices are down 3.4 percent this year.

Brent for June settlement rose 27 cents to $100.22 a barrel on the London-based ICE Futures Europe exchange. The contract fell 72 cents to $99.91 yesterday, the lowest close since July 10. The front-month European benchmark grade was at a premium of $11.25 to WTI futures, from $10.88 yesterday.

Technical Support

WTI rebounded as much as 0.4 percent after a technical indicator showed futures have fallen too quickly for further losses to be sustainable. Prices settled below the 30-day lower Bollinger Band for a second day yesterday, signaling the market is oversold, according to data compiled by Bloomberg. WTI also rebounded in early March after dropping below this band. The indicator, around $88.63 a barrel today, presents technical support today, a level where buy orders may be clustered.

Brent is unlikely to fall to $90 a barrel because there will be a “pick-up in hedging activity” among oil consumers to support prices, Barclays Plc said in an e-mailed report yesterday. The crude is unlikely to remain below $100 after the second quarter as demand increases, according to the bank.

“Brent below $100 a barrel is something you can consider buying,” said Dominic Schnider, head of commodities research at UBS AG’s wealth-management unit in Singapore. “We expect demand to pick up over the second half of 2013. There’s great value for Brent at $90-95, and a strong buy at these levels.”

Fuel Supplies

U.S. gasoline supplies rose 253,000 barrels last week, the API said. They are forecast to slip800,000 barrels in today’s report by the Energy Information Administration, the Energy Department’s statistical arm, according to the median estimate of 11 analysts in the Bloomberg News survey. Distillate inventories, a category that includes heating oil and diesel, climbed 1.3 million barrels in the API data. They are projected to drop 350,000 barrels in the EIA report.

The global economy will expand 3.3 percent this year, less than the 3.5 percent forecast in January, the Washington-based IMF said yesterday as it cut its prediction for a fourth consecutive time.

The growth projection for the U.S., the world’s biggest oil consumer, was trimmed to 1.9 percent from 2 percent. China, the second-largest crude user, was lowered to 8 percent from 8.2 percent. The IMF sees the 17-country euro area shrinking 0.3 percent, compared with a 0.2 percent retreat predicted in January.

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

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