WTI set for first weekly loss in three as Brent gap widens

4/25/2014

WTI set for first weekly loss in three as Brent gap widens

MOMING ZHOU
 
WASHINGTON, D.C. (Bloomberg) -- West Texas Intermediate crude headed for the first weekly loss in three, widening the discount to Brent, as U.S. stockpiles expanded and demand fell.
 
Futures dropped as much as 1.4% today. Stockpiles increased in 13 of the past 14 weeks to reach the highest level since government weekly data started in 1982, an Energy Information Administration report shows. Fuel demand dropped to a 10-month low. Brent traded near $110 on concern the Ukraine crisis may disrupt global supplies.
 
“WTI is retreating because of the massive inventories in the U.S.,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “There is no increase in fuel demand and the fundamental picture is weak. The Brent-WTI spread is widening due to Ukraine.”
 
WTI for June delivery fell $1.34, or 1.3%, to $100.60 a barrel at 9:25 a.m. on the New York Mercantile Exchange. The futures are down 3.5% this week. The volume of all futures traded was 3% above the 100-day average for the time of day.
 
Brent for May settlement slid 55 cents, or 0.5%, to $109.78 a barrel on the London-based ICE Futures Europe exchange. WTI’s discount to the European benchmark crude expanded to $9.18 a barrel from $8.39 yesterday.
 
Crude stockpiles grew 3.52 MMbbl in the seven days ended April 18 to 397.7 million, the EIA, the Energy Department’s statistical arm, reported on April 23. It’s the highest level since the EIA weekly data started in August 1982. In monthly data, supplies were higher in May 1931.
 
Stockpiles along the Gulf Coast, known as PADD 3, climbed to 209.6 million, the most in EIA data going back to 1990. Supplies have increased in the region since January as the southern leg of the Keystone XL pipeline began moving oil from Oklahoma to the Gulf of Mexico. U.S. law bars almost all crude exports. U.S. crude production increased to 8.36 MMbpd in the week ended April 18, the most since 1988.
 
“U.S. inventories are weighing on WTI, whilst increasing tension in eastern Ukraine has been supporting Brent,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said by email. “It’s rather unlikely the spread will narrow unless the situation in Ukraine eases.”
 
Total oil demand dropped 361,000 bpd in the week ended April 18 to 18.1 million, the lowest level since June 7, according to the EIA.
 
Brent rose this week on signs of the escalating crisis in Ukraine. President Barack Obama was set to discuss a possible expansion of sanctions with European leaders after U.S. Secretary of State John Kerry said Russia is running out of time to ease tension.
 
Obama, who’s visiting South Korea, planned a conference call with leaders including German Chancellor Angela Merkel. In Washington yesterday, Kerry accused Russian President Vladimir Putin’s government, which began new military exercises on Ukraine’s border, of using the “barrel of a gun and the force of a mob” to impose its will on its neighbor.

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