Thursday, March 13, 2014

Crude descent continues

By Moming Zhou

West Texas Intermediate crude (NYMEX:CLJ14) traded near a five-week low as China refined the least crude in four months and U.S. inventories surged.

Prices moved between gains and losses. Refinery processing in China fell 1% from a year earlier in the January-to- February period, the National Bureau of Statistics said today. U.S. crude stockpiles increased last week to the highest level since Dec. 13 as refiners reduced operations to a four-month low. WTI rose earlier on better-than-expected U.S. economic reports.

“If China consumes less crude, obviously it’s going to hit the oil market,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “The economic news is good. Crude has a chance to come back above $100 when the utilization rate increases.”

WTI for April delivery rose 30 cents to $98.29 a barrel at 11:26 a.m. on the New York Mercantile Exchange after dropping to $97.67. The contract decreased 2% to $97.99 yesterday, the lowest close since Feb. 6. The volume of all futures traded was 30% above the 100-day average.

Brent for April settlement slipped 32 cents, or 0.3%, to $107.70 a barrel on the London-based ICE Futures Europe exchange. Volume was 23% below the $100-day average. The European crude traded at a premium of $9.41 to WTI. The spread ended at $10.03 yesterday, the widest close in six weeks.

Chinese demand

Refinery crude use in China decreased to 78.78 million metric tons, the statistics bureau said in a statement on its website. That’s equivalent to 9.79 million barrels a day, the lowest rate since October. The bureau in Beijing combines data for the two months, citing distortions from the week-long Lunar New Year holiday, whose timing differs each year.

“Refinery demand is weak both in China and the U.S.,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “It’s a big concern for the market.”

U.S. crude stockpiles rose 6.18 million barrels last week to 370 million barrels, according to the Energy Information Administration, the Energy Department’s statistical arm. Domestic production climbed 1.3% to 8.18 million barrels a day, the most since July 1988.

The refinery utilization rate slipped 1.4 percentage points to 86% of capacity, the least since October. Supplies at Cushing, Okla., the delivery point for WTI futures, fell 1.34 million barrels to 30.8 million, a two-year low.

Test sale

The Energy Department announced yesterday it would sell 5 million barrels of crude from the Strategic Petroleum Reserve in a test of the distribution system. The sale of less than 1% of the total stockpile was scheduled and isn’t tied to turmoil in Ukraine or other geopolitical events, the department said. Potential buyers have until tomorrow to submit bids. Delivery will start April 1 and end April 30.

The release is “a storm in a tea-cup, given the small size,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by e-mail. There is probably no connection between the release and tensions with Russia over Ukraine, he said.

WTI rose earlier as jobless claims unexpectedly fell last week to the lowest level since the end of November and retail sales rose in February for the first time in three months.

The euro approached $1.40, a level it hasn’t touched in more than two years, as policy makers signal support for the currency bloc’s economic recovery. A stronger euro and weaker dollar increase oil’s investment appeal.

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

See the original article >>

No comments:

Post a Comment

Follow Us