Brent crude falls on Chinese data; WTI gains on slower supply gain

MARK SHENK

NEW YORK (Bloomberg) -- Oil fell in London for a fourth day after China reduced crude imports. Futures advanced in New York after an industry survey was said to report a slowdown in crude stockpile increases at Cushing, Oklahoma.

Brent slid 2% after a report showed Chinese crude imports fell 8.7% in February from the previous month. West Texas Intermediate futures climbed after Genscape Inc. was said to report a smaller inventory increase at Cushing, the delivery point for WTI traded in New York, according to analysts including Carl Larry, head of oil and gas for Frost & Sullivan LP in Houston.

“Brent is moving lower in response to the Chinese demand numbers,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “The Chinese data had little impact on WTI.”

Oil slumped almost 50% in 2014 as expanding U.S. stockpiles and production worsened a global supply glut. While oil prices have rebounded this year, the rally may reverse as crude inventories increase, according to Goldman Sachs Group Inc. Output continues to grow, even as the number of U.S. rigs seeking oil dropped for a 13th week to the lowest since April 2011, according to Baker Hughes Inc.

Brent for April settlement declined $1.20 to end the session at $58.53/bbl on the London-based ICE Futures Europe. It was the lowest close since Feb. 12. The volume of all futures traded was little changed from the 100-day average at 3:01 p.m. in New York.

WTI Increase

WTI for April delivery rose $0.39/bbl to settle at $50/bbl a barrel on the New York Mercantile Exchange. Volume was up 23% from the 100-day average. The U.S. benchmark crude settled at an $8.53 discount to Brent, compared with $10.12 at Friday’s close.

Chinese crude imports fell by 2.43 MMt in February to 25.6 MMt, a second monthly decrease. The country’s Lunar New Year holiday crimped imports of oil and other commodities including iron ore and copper.

“You’ve got some spread unwinding because there have been bearish bits of news about Brent,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $3.4 billion, said by phone

Cushing stockpiles rose 1.7 MMbbl last week, which slowed to a gain of only 157,000 bbl in the period running from March 3 to March 6, according to a Genscape report, Larry said. Supplies at the hub more than doubled in the last three months, according to government data.

Bearish Mantra

“This kills the mantra of the bears who were saying that the tanks at Cushing would be filled to capacity in a couple months,” Phil Flynn, a senior market analyst at the Price Futures Group in Chicago, said by phone. “This shows the oil is getting out of Oklahoma and going to the refineries on the Gulf Coast that can process it and export fuel.”

U.S. crude stockpiles rose by 10.3 MMbbl to 444.4 million in the week ended Feb. 27, the Energy Information Administration said March 4. Production increased by 39,000 barrels to 9.32 million a day, the highest level in weekly data from the EIA since January 1983.

The EIA is projected to report on Wednesday that U.S. crude supplies climbed last week while stockpiles of gasoline and distillate fuel, a category that includes heating oil and diesel, fell, according to a Bloomberg survey of analysts.

Pivot Point

“The $50 area is the pivot point for WTI right now,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “We’ll see inventories build again, probably substantially because of the refinery-run rate, which will put downward pressure on the market later this week.”

Oil may not reach a forecast of $65/bbl in 2016 because supply is set to expand, Goldman Sachs said in a report on March 8. U.S. companies are raising equity and reducing debt, indicating that they plan to boost exploration and production activity later this year, it said.

Speculators pared their net-long positions in WTI by 19% to 164,310 futures and options in the week ended March 3, the lowest level since November, according to data from U.S. Commodity Futures Trading Commission.

Bullish bets on Brent increased to 192,361 contracts in the same period, marking a fourth weekly advance to the highest since July 8, according to ICE Futures Europe.