Bloomberg News

Oil Extends Gains on Seaway Reversal, Retail Sales

April 17, 2012

Oil rose to the highest in three days in New York on a bigger-than-projected gain in U.S. retail sales and expectation that the Seaway crude pipeline reversal will help reduce a supply glut.

Futures in New York also extended gains after advancing for a third time in four days yesterday on better-than-expected German investor confidence data and Spain bond auction. Seaway pipeline operators said they would reverse its flow earlier than planned. U.S. retail sales increased more than forecast in March as Americans snapped up everything from cars and furniture to clothes and electronics.

“West Texas Intermediate was supported by the news that the Seaway pipeline will start shipping oil from Cushing to the U.S. Gulf from May 17, which is earlier than anticipated,” said James Zhang, London-based commodity strategist at Standard Bank Plc. “In addition, the tariff Seaway is charging customers is in the range of $3 to $5 a barrel, which takes away the markets fear that Seaway might charge a rate comparable to the very wide WTI/Brent spread.”

Crude for May delivery climbed as much as $1.14, or 1.1 percent, to $104.07 a barrel in electronic trading on the New York Mercantile Exchange. It was at $103.84 as of 1:32 p.m. London time. Yesterday, the contract gained 10 cents to $102.93, the highest close since April 12. Prices are 5 percent higher this year.

Brent oil for June settlement fell 43 cents, or 0.3 percent, to $118.25 a barrel on the London-based ICE Futures Europe exchange. The contract earlier rose to as high as $119.18 after Spain sold 12-month and 18-month bills.

Narrow Spread

The European benchmark contract’s front-month premium to West Texas Intermediate was at $14.41. The spread narrowed to $15.31 yesterday, the lowest close in seven weeks.

The 0.8 percent gain in U.S. retail sales was almost three times as large as projected and followed a 1 percent advance in February, Commerce Department figures showed yesterday in Washington. The median forecast of 81 economists surveyed by Bloomberg News called for an increase of 0.3 percent.

Enbridge Inc. (ENB) and Enterprise Products Partners LP (EPD:US) said they plan to switch the Seaway pipeline flow on about May 17, according to a filing with the Federal Energy Regulatory Commission. That’s earlier than a previous June 1 start date. The reversal will carry crude from Cushing, Oklahoma, to the U.S. Gulf Coast and is forecast to cut a glut in the Midwest.

Oil in New York has technical support along its 100-day moving average at about $101.80 a barrel, according to data compiled by Bloomberg. Futures yesterday slid to that indicator before rebounding to settle higher for the day. Buy orders tend to be clustered near chart-support levels.

Spain Debt Auction

Spain sold 3.18 billion euros of bills, compared with a maximum target of 3 billion euros the Treasury set for the sale.

The average 12-month yield was 2.623 percent, compared with 1.418 percent at the last auction on March 20, the Bank of Spain said in Madrid today. The Treasury also sold 18-month bills at 3.11 percent, compared with 1.711 percent last month.

The ZEW Center for European Economic Research in Mannheim, Germany, said its index of investor and analyst expectations, which predicts economic developments six months in advance, increased to 23.4 from 22.3 in March. That’s the highest reading since June 2010. Economists forecast a decline to 19, according to the median of 39 estimates in a Bloomberg News survey.

‘Serious Risk’

Current oil prices are a “serious risk” to the global economic recovery, Fatih Birol, chief economist at the International Energy Agency, said today at a conference in Amsterdam.

Foreign direct investment in China fell 6.1 percent in March from a year earlier, a fifth monthly decline, according to data from the Ministry of Commerce today. India unexpectedly cut its benchmark interest rate by a greater-than-forecast half a percentage point, seeking to bolster growth with the first reduction since 2009.

U.S. crude stockpiles probably climbed 1.3 million barrels to 366.5 million last week, according to a Bloomberg News survey of analysts before an Energy Department report tomorrow. An advance of that size would leave supplies at the highest level since the week ended June 3.

Gasoline inventories probably fell 1.03 million barrels, the survey shows. Distillates, a category that includes heating oil and diesel, dropped 25,000 barrels.

The American Petroleum Institute will release separate inventory data today. 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.

To contact the reporter on this story: Sherry Su in London at lsu23@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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Companies Mentioned

  • EPD
    (Enterprise Products Partners LP)
    • $72.95 USD
    • -0.11
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