WTI Oil Pares Gain After Report Shows Fuel Supply Gains By Mark Shenk Jan 7, 2015 Oil Has Fallen Into Overshooting Territory: David Woo West Texas Intermediate oil pared gains after a government report showed that U.S. fuel stockpiles surged. Brent earlier slipped below $50 a barrel for the first time since May 2009. Inventories of distillate fuel, a category that includes heating oil and diesel, increased by a record 11.2 million barrels last week, the Energy Information Administration said. Gasoline stockpiles advanced 8.12 million barrels while crude supplies decreased 3.06 million. “This report is bearish overall because of the huge builds in distillate and gasoline supplies,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “You can ignore the crude number because there’s already so much in storage. This decline was just a drop in the bucket.” Crude slumped by 48 percent last year, the most since the 2008 financial crisis, as the U.S. pumped at the fastest pace in more than three decades and the Organization of Petroleum Exporting Countries decided to maintain its output ceiling. The oversupply may take “months or years” to be absorbed, United Arab Emirates Energy Minister Suhail Al Mazrouei said. WTI for February delivery increased 45 cents, or 0.9 percent, to $48.38 a barrel at 11:45 a.m. on the New York Mercantile Exchange, paring an advance of as much as 2.9 percent. Futures earlier touched $46.83, the lowest level since April 2009. The volume of all futures traded was 52 percent above the 100-day average for the time of day. Brent Futures Brent for February settlement fell 28 cents, or 0.6 percent, to $50.82 a barrel on the London-based ICE Futures Europe exchange. It earlier touched $49.66, the least since April 29, 2009. Volume for all futures traded was 78 percent above the 100-day average. The European benchmark oil traded at a $2.44 premium to WTI. Implied volatility for at-the-money options in the front-month WTI contract rose to 60.2 percent this week, the highest level in more than three years, data compiled by Bloomberg show. It’s about 58 percent today, while Brent’s volatility is almost 49 percent. Inventories of distillate fuel climbed 11.2 million to 136.9 million in the week ended Jan. 2, according to the EIA, the Energy Department’s statistical arm. Gasoline supplies rose 8.12 million barrels to 237.2 million, the highest level since February 2011. Distillate demand tumbled 32 percent to 2.87 million barrels a day last week, while gasoline use slipped 3 percent to 19.3 million. Refinery Operations Refineries operated at 93.9 percent of their capacity, down 0.5 percentage point from the prior week. Refineries have operated at over 90 percent of capacity for the last two months. “Refineries are operating at relatively high rates, which is part of the story for products,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “The other part is that the EIA calculates demand by measuring refinery shipments. Refineries didn’t ship much production during the New Year’s holiday, which allowed supplies to accumulate rapidly.” Gasoline futures declined 2.29 cents, or 1.7 percent, to $1.3314 a gallon. The motor fuel earlier slipped to $1.3227, the lowest level since March 2009. Diesel decreased 3.48 cents, or 2 percent, to $1.6914, after dropping to $1.6778, the lowest intraday price since September 2009. Regular gasoline at U.S. pumps fell to the lowest level since May 2009. The average retail price slipped 0.3 cent to $2.191 a gallon yesterday, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group. Pump prices were around $2.05 a gallon when oil was last below $50 a barrel. Crude Output U.S. crude production rose 11,000 barrels a day to 9.13 million last week. Output climbed to 9.14 million a day through Dec. 12, the most in weekly data that started in January 1983. Crude supplies at Cushing, Oklahoma, delivery point for WTI traded in New York, increased 1.31 million barrels to 32.1 million last week, the highest level since February. Oil’s oversupply “needs time to be absorbed” and prices this year may depend on output growth from non-OPEC producers, the U.A.E.’s Al Mazrouei said, according to The National, an Abu Dhabi daily. Qatar, another of OPEC’s 12 members, has estimated the global surplus at 2 million barrels a day. Iranian Viewpoint Iran has held talks with Russia to reduce supply from the world’s biggest producer, according to Iranian Oil Minister Bijan Namdar Zanganeh. The parties haven’t reached a conclusion yet, the minister was cited by state-run Mehr news agency as saying. While consensus within OPEC to stop the price decline is important, an emergency meeting of the group “won’t in itself solve problems,” Zanganeh said. OPEC, which pumps about 40 percent of the world’s oil, agreed to maintain its output quota at 30 million barrels a day at a Nov. 27 gathering. It’s next scheduled to meet on June 5. China’s net oil imports will probably rise 3.3 percent this year, compared with 8.9 percent in 2014, as “a slower build-out of refining capacity and record commercial storage builds in 2014 are likely to limit growth,” Citigroup strategists including Ivan Szpakowski in Hong Kong said in a research note.
Posted on: Wed, 07 Jan 2015 18:12:05 +0000
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