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WTI Crude Slips, Discount to Brent Widens

06 Feb 2013
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  • Oil slipped in New York after the biggest gain in a week, widening its discount to Brent crude to the most this year. U.S. crude and gasoline stockpiles rose last week, and distillate inventories fell, an industry report said.

    West Texas Intermediate futures declined as much as 0.5 percent. WTI’s discount to London-traded Brent widened for a sixth day as limits on the Seaway pipeline cut flows to Gulf Coast refineries. U.S. crude supplies rose by 3.63 million barrels, the American Petroleum Institute said. Energy Department data due today will probably show oil inventories rose to a seven-week high.

    “We’re moving into the refinery maintenance season so that could affect crude stock builds, at the end of this quarter demand should go lower,” said Thina Saltvedt, an analyst at Nordea Bank AG, who predicts that prices will remain supported at current levels by geopolitical concern and improved demand for riskier assets.

    Crude for March delivery was 51 cents lower at $96.13 a barrel in electronic trading on the New York Mercantile Exchange at 9:56 a.m. London time. The contract rose 0.5 percent yesterday, the biggest gain since Jan. 29. Prices slid 1.6 percent on Feb. 4, the most since Dec. 6.

    Brent for March settlement fell 13 cents to $116.39 a barrel on the London-based ICE Futures Europe exchange. The volume of all WTI contracts traded at that time was 14.9 percent above the 100-day average, while Brent was 10.3 percent higher.

    Iran Sanctions

    The European benchmark grade was at a premium of as much as $20.42 to WTI, the widest spread on an intraday basis since Dec. 26. The gap has grown since Enterprise Product Partners LP said Jan. 31 that capacity on the Seaway pipeline to the Gulf Coast from Cushing, Oklahoma, will be limited until late 2013.

    The U.S. will tighten sanctions on Iran today with measures blocking importers from paying for Iranian crude with dollars, euros and other hard currencies.

    Under penalty of expulsion from the U.S. banking system, customers such as China, Japan and India will be restricted to using their own currencies for the purchases and keeping the payments in escrow accounts. Iran will be able to use the funds only for locally sourced goods and services, in what will amount to barter arrangements.

    Oil’s rebound in New York stalled yesterday along the bottom of an uptrend channel that was breached the previous day, signaling technical resistance, where sell orders may be clustered. This indicator is around $97.50 a barrel today, according to data compiled by Bloomberg.

    Fuel Supplies

    Distillate inventories, including heating oil and diesel, dropped 1.45 million barrels while gasoline supplies added 1.56 million, API data showed. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

    Crude supplies rose 2.65 million barrels last week, according to the median estimate of eight analysts in a Bloomberg News survey before the government report. Gasoline stockpiles gained 900,000 barrels and distillate inventories declined 625,000 barrels in the survey. The department is scheduled to release its inventory report at 10:30 a.m. today in Washington.

    U.S. gasoline demand fell 1.6 percent last week to 8.5 million barrels a day for the seven days to Feb. 1, MasterCard Inc. said yesterday in its SpendingPulse report. The API data showed motor fuel consumption climbed 3.7 percent to 9.2 million barrels daily, the most since the week of Dec. 21.

    Operating companies have now announced most of the March loading programs for North Sea crude oils. Of those, the most important are Brent, Forties, Oseberg and Ekofisk, which make up the Dated Brent benchmark. Combined daily exports of those four, known as BFOE, will decrease by 12 percent in March from this month, loading programs obtained by Bloomberg on Feb. 4 show.