West Texas Intermediate crude was little changed near the lowest level in four months amid rising supplies and as the dollar weakened against the euro.
Prices ended up 1 cent. Libya, North Africa’s largest oil producer, prepared to resume exports at two terminals, according to the state oil company. U.S. crude stockpiles are at the most in four months, and shipments from Iraq jumped in October, government reports showed last week. The dollar slid from a six-week high, strengthening oil as an alternate investment, amid speculation that the Federal Reserve will maintain stimulus.
“The news that Libya is going to raise exports should be bearish,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “U.S. crude inventories are over abundant. That’s keeping WTI lower than Brent. People are pricing in Fed stimulus and a weaker dollar.”
WTI for December delivery reached $94.62 a barrel on the New York Mercantile Exchange. It settled at $94.61 on Nov. 1, the least since June 21. The volume of all futures traded was 23 percent below the 100-day average at 3:53 p.m. WTI dropped 5.8 percent in October, the biggest monthly decline in a year.
Brent for December settlement gained 32 cents, or 0.3 percent, to $106.23 a barrel on the London-based ICE Futures Europe exchange. Volume was 4.7 percent above the 100-day average. The European benchmark’s premium over WTI widened to $11.61 from $11.30 on Nov. 1.
A tanker is scheduled to take on oil at Libya’s Mellitah terminal tomorrow and loadings will probably resume next week at Hariga once vessels arrive at the eastern port, said Mohamed Elharari, a spokesman for state-run National Oil Corp.
Production in the country has been reduced amid nationwide protests. Output was about 250,000 barrels yesterday, Elharari said. It averaged 450,000 barrels a day in October, according to a monthly Bloomberg survey of production across the Organization of Petroleum Exporting Countries.
“Libya is trying to get more oil out and as they move that direction, it’s putting downward pressure on both Brent and WTI,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.
Crude futures tumbled 14 percent in the eight weeks ended Nov. 1 on the economic outlook and as U.S. crude inventories surged to the highest level since June.
U.S. crude inventories climbed to 383.9 million barrels in the week ended Oct. 25, capping 7.9 percent jump over six weeks, according to the Energy Information Administration, the Energy Department’s statistical arm.
“That’s what a bear market looks like in terms of unending downward pressure,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We have plenty of supplies here.”
The two Brent contracts closest to expiration moved into a pattern known as contango in intraday trading, when December Brent fell 1 cent below the January contract. December futures closed 13 cents above January. The most active contracts last settled in contango in June.
Morgan Stanley (MS:US) said earlier that the “push toward contango” was caused by a combination of weak demand, an increase in supplies from Iraq and the start of a North Sea oilfield. Iraq exported 2.25 million barrels a day last month, compared with 2.07 million in September, Asim Jihad, an oil ministry spokesman, said Nov. 1. Total SA said Oct. 28 that the Ekofisk South field was brought on stream.
WTI futures climbed as much as 0.5 percent as the dollar weakened against the euro as the Commerce Department reported slower-than-estimated factory orders. The euro strengthened amid speculation that the European Central Bank will refrain from cutting interest rates at a meeting this week.
The U.S. currency fell 0.2 percent to $1.3518 per euro at 3:51 p.m. in New York.
“The dollar is coming off from its highs and it’s bringing the market some support,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago.
The Fed decided at its meeting last week to press on with $85 billion in monthly bond purchases, saying it needs to see more evidence that the economy will keep improving. Fed Bank of Dallas President Richard Fisher, who has criticized the bond-purchase program, said in an interview with Bloomberg in Sydney that he wouldn’t rule out backing a tapering of purchases by March depending on economic conditions.
“The data is not great, and it encourages further easing from the Fed,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “If there are more crude-oil builds, it’s going to prevent prices from moving higher.”
CME Group Inc. (CME:US), owner of the Nymex, cut the margin requirement for speculators on front-month futures by 9.8 percent to $4,070 per contract from $4,510, the company said in a notice to customers on Nov. 1. The rate will be effective at the close of business tomorrow.
“Lower margins are usually reasons for people to buy more futures,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “Supplies are keeping pressure on prices.”
Implied volatility for at-the-money WTI options expiring in December was 21 percent, up from 20 percent on Nov. 1, according to data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 425,494 contracts as of 3:53 p.m. It totaled 577,812 contracts on Nov. 1, 0.6 percent below the three-month average. Open interest was 1.75 million contracts, the least since June 5.
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