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Brent Crude Trades Near One-Month Low With WTI Oil

By Grant Smith
July 09, 2014 9:29 AM EDT 18 Comments

Brent crude traded at a one-month low amid signs Libyan oil exports will rebound. West Texas Intermediate also fell to the lowest in a month before oil inventory data.

Brent fell as much as 0.5 percent in London, while WTI slipped for a ninth day in its longest decline since 2009. Crude stockpiles probably shrank by 2.5 million barrels last week, a Bloomberg News survey shows. Libya, which has regained control of oil ports seized by rebels, plans to gradually increase exports to avoid disrupting the market, said Samir Kamal, the nation’s governor to the Organization of Petroleum Exporting Countries.

“The supply risks that have been supporting oil prices for months are continuing to abate,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report. “Oil prices are continuing on their downward trajectory.”

Brent for August settlement dropped as much as 53 cents to $108.41 a barrel on the London-based ICE Futures Europe exchange, and traded for $108.65 at 2:14 p.m. local time. It decreased 1.2 percent yesterday, erasing gains made since early June when Islamic militants seized the northern Iraqi city of Mosul. The European benchmark grade traded at a $5.74 premium to WTI on ICE. The spread closed at $5.54 yesterday, the narrowest since June 10.

Libyan Storage

WTI for August delivery fell as much as 70 cents to $102.70 a barrel in electronic trading on the New York Mercantile Exchange, the lowest since June 9. The volume of all futures traded was about 26 percent below the 100-day average for the time of day. Prices have risen 4.4 percent this year.

Libya has 7.5 million barrels of oil stored at the ports of Es Sider and Ras Lanuf after lifting force majeure, Oil Ministry Measurement Director Ibrahim Al-Awami said by phone on June 7. Production was 327,000 barrels a day as of yesterday, National Oil Corp. spokesman Mohamed Elharari said by phone. The country has slipped to being the smallest producer in OPEC as political protests cripple its output.

“After the stocks have been lifted at the ports we should see Libya’s crude oil production rising,” Olivier Jakob, managing director at consultant Petromatrix GmbH in Zug, Switzerland, said by e-mail. “The crude oil physical market in the Atlantic Basin was already long” before Libya’s recovery, he said.

U.S. Inventories

U.S. crude inventories probably declined to 382.4 million barrels in the week ended July 4, according to the Bloomberg survey of nine analysts before data from the Energy Information Administration today. Supplies expanded to 399.4 million through April 25, the highest level since the Energy Department’s statistical arm began publishing weekly figures in 1982.

Stockpiles fell by 1.7 million, the American Petroleum Institute was said to report yesterday. The industry group in Washington collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines, while the government requires that data be filed with the EIA.

Gasoline inventories probably dropped by 400,000 barrels to 213.3 million, according to the median estimate in the survey. Distillates, including heating oil and diesel, are projected to have climbed by 1.4 million.

WTI has technical support along its 50-day moving average, at about $103.40 a barrel today, data compiled by Bloomberg show. Futures recovered intraday losses the past two days to settle above this indicator. Buy orders tend to be clustered around chart-support levels.

EIA Forecasts

The EIA raised its oil-price forecasts for 2014 and 2015 because of the increase in violence in Iraq. WTI will average $100.98 a barrel this year, compared with the June projection of $98.67, according to its monthly Short-Term Energy Outlook yesterday. Brent will average $109.55, up from $107.82 previously estimated.

“We now get back to underlying fundamentals and look to the northern hemisphere summer as a driver of demand,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney, who predicts investors may buy West Texas contracts if prices fall to about $101.50 a barrel. “One of the key drivers is that there has been no further advance in Iraq.”

Iraq’s south, home to more than three-quarters of its crude output, remained unaffected by fighting between government forces and insurgents from a breakaway al-Qaeda group known as the Islamic State. The country is the second-largest producer in OPEC, data compiled by Bloomberg show.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Rachel Graham, Randall Hackley

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