Bloomberg News

WTI Crude Slips, Discount to Brent Widens

February 06, 2013

Oil fell to its lowest in 13 days in New York, widening its discount to Brent crude to the most this year. U.S. crude and gasoline stockpiles rose last week, an industry report showed.

West Texas Intermediate futures declined as much as 1.5 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. The U.S. will tighten sanctions on Iran today with measures blocking the exporter from repatriating oil payments in dollars, euros and other hard currencies.

“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 dropped as much as $1.45 to $95.19 a barrel in electronic trading on the New York Mercantile Exchange, the lowest since Jan. 24, and was at $95.37 at 1:16 p.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 62 cents to $115.90 a barrel on the London-based ICE Futures Europe exchange. The volume of all WTI contracts traded at that time was 66 percent above the 100-day average, while Brent was 35 percent higher.

Iran Sanctions

The European benchmark grade was at a premium of as much as $20.49 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. imposes new restrictions on Iran this week as part of sanctions over that country’s nuclear program. Crude buyers such as China, Japan and India must use their own currencies to pay Iran and keep the payments in escrow accounts, or else risk expulsion from the U.S. banking system. Iran will be able to use the funds only for locally sourced goods and services, in what will amount to barter arrangements.

WTI’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 announced most of the March loading programs for North Sea crude oils. Of those, the most important are Brent, Forties, Oseberg and Ekofisk, which together comprise 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.

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

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


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