West Texas Intermediate crude slid for a second day amid speculation that U.S. inventories climbed to the highest level in more than 22 years.
Futures fell as much as 0.5 percent in New York. U.S. crude supplies probably increased 2.3 million barrels last week, according to a Bloomberg News survey of analysts before a government report tomorrow. Prices slipped yesterday after data showed U.S. manufacturing grew less than forecast in March. Exxon Mobil Corp. (XOM:US) is developing a plan to repair a damaged section of the Pegasus pipeline that moves crude to Gulf Coast refineries. The line was shut because of a leak.
“It is possible to have another sharp build in crude stocks that could set a bearish tone,” Myrto Sokou, an analyst at Sucden Financial Ltd. in London, said in an e-mail. “The weak U.S. PMI data adds some pressure to the oil market, raising renewed concerns about a possible slowdown in oil demand. Prices are in consolidation mode, struggling to find some direction ahead of the U.S. economic releases,” including one today on factory orders.
WTI for May delivery declined as much as 45 cents to $96.62 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $96.91 at 1:45 p.m. London time. The volume of all futures traded was 34 percent above the 100- day average. The contract closed at $97.07 yesterday, the lowest settlement since March 27.
Brent for May settlement was at $111.51 a barrel, up 43 cents, on the London-based ICE Futures Europe exchange. It climbed $1.06, or 1 percent, to $111.08 yesterday. The volume of all futures traded was 8 percent below the 100-day average. The European benchmark grade was at a premium of $14.54 to WTI futures, growing from $14.01 yesterday.
Brent’s premium widened yesterday as the Pegasus shutdown threatened to exacerbate a glut of oil coming from Canada to the U.S. Midwestern states, depressing U.S. prices relative to European contracts.
“The weakness in West Texas reflects the closing of the Exxon pipeline and a bit of a pause given the moderate manufacturing figures that we’ve seen,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “Any decline from here, provided we stay above the previous peaks at about $94, might be more corrective.”
Exxon’s 96,000 barrel-a-day Pegasus pipeline line was shut after a leak was discovered in Arkansas on March 29. The line runs 940 miles (1,512 kilometers) from Patoka, Illinois, to Nederland, Texas, and serves refineries around Port Arthur and Beaumont in eastern Texas.
Four plants near the cities can process about 1.4 million barrels a day of crude, according to data compiled by Bloomberg. The facilities are operated by Exxon, Valero Energy Corp. (VLO:US), Total SA and Motiva Enterprises LLC.
U.S. gasoline stockpiles probably slid 1 million barrels last week, according to the median estimate of six analysts surveyed by Bloomberg before an Energy Department report tomorrow. Distillate supplies, a category that includes heating oil and diesel, fell 750,000 barrels, the survey shows.
The industry-funded American Petroleum Institute is scheduled to release separate inventory data today at 4:30 p.m. Washington time. 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 Information Administration, the Energy Department’s statistics unit, for its weekly survey.
Demand for crude will remain strong from Asian buyers as the U.S. produces more of its own oil, Saudi Arabian Oil Minister Ali al-Naimi said yesterday in a speech in Doha, Qatar, carried by the official Saudi Press Agency.
Oil output by Petroleos Mexicanos, Mexico’s state-owned producer, known as Pemex, dropped in March to the lowest since January 2012, to 2.525 million barrels a day, the company said in a report yesterday.
Supply from Pemex’s largest field, Ku-Maloob-Zaap, fell 2.5 percent to 845,000 barrels a day, the company said. Pemex sent 1.1 million barrels daily to its exports terminals last month, according to the report.
Hedge funds and other money managers raised bullish bets on Brent crude for the second week, according data from the ICE Futures Europe exchange yesterday. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 130,473 lots in the week ended March 26, up 3 percent from the previous period, the data showed.
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