West Texas Intermediate crude rose for the first time in three days on speculation that inventories at Cushing, Oklahoma, fell last week. The price of Brent gained.
WTI settled above $100 a barrel for an eighth day. Supplies at the futures’ delivery point probably slid for a fourth week, four analysts forecast, as the southern leg of TransCanada Corp.’s (TRP) Keystone XL pipeline moved oil to Texas. Crude also increased as the Standard & Poor’s 500 index reached a record.
“We should see some further declines in Cushing inventories,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “With the stock market charging higher, we are getting some overall support there.”
WTI for April delivery advanced 62 cents, or 0.6 percent, to settle at $102.82 a barrel on the New York Mercantile Exchange. Prices are up 5.5 percent this month. The volume of all futures traded was 28 percent below the 100-day average at 3:08 p.m.
Brent for April settlement climbed 79 cents, or 0.7 percent, to $110.64 a barrel on the London-based ICE Futures Europe exchange. Volume was 1.2 percent below the 100-day average. The European benchmark was at a premium of $7.82 to WTI, compared with $7.65 Feb. 21.
“Cushing is still playing a big role right now,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market’s trying to hold solidly above $100.”
Cushing Downtrend
Cushing stockpiles dropped 5.96 million barrels in the three weeks ended Feb. 14 to 35.9 million, the least since October, according to the Energy Information Administration. The EIA, the Energy Department’s statistical arm, is scheduled to release last week’s inventory data on Feb. 26.
“We expect this downtrend at Cushing to continue for at least a few more weeks, so any fundamental disappointment for WTI crude oil will most likely arrive from some other quarter,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York, in a note to clients.
Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC, and Phil Flynn, senior market analyst at Price Futures Group in Chicago, also forecast a decrease. Finlon said supplies at the hub dropped 1.3 million barrels last week, while Flynn said the decline was 1 million.
Keystone XL
The southern Keystone XL link began moving oil to the Texas Gulf Coast from Cushing last month. The line was initially flowing at 288,000 barrels a day and will ramp up over the course of the year toward its 700,000-barrel capacity, executives said in a Jan. 22 press conference at the company’s headquarters in Calgary.
Crude inventories in states along the Gulf Coast, a region known as PADD 3, rose for the fifth consecutive time in the week ended Feb. 14 to 176.1 million barrels. Oklahoma is in PADD 2.
U.S. equities gained as investors bet that the economy can withstand a slowdown of the Federal Reserve’s bond-buying program. The S&P 500 advanced as much as 1.2 percent to 1,858.71.
“Stocks are very strong, and oil is moving along,” Flynn said.
Fed Chairman Janet Yellen said this month that the economy has strengthened enough to withstand stimulus cuts, adding that only a notable change to the outlook would prompt the central bank to slow the pace of tapering.
The U.S., the world’s biggest oil-consuming country, will use 18.9 million barrels a day of oil this year, according to an EIA forecast.
Technical Analysis
Prices may face downward pressure as the 14-day relative strength index nears 70, a level that signals price gains have been excessive, said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.
“Oil is above $102 now, and I don’t think there is a lot more to the upside,” Larry said.
WTI futures have support around the $99.70 level, near the 200-day moving average, said Bill Baruch, a senior market strategist at Iitrader.com in Chicago.
Implied volatility for at-the-money WTI options expiring in April was 16.3 percent, up from 16 percent Feb. 21, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 330,462 contracts at 3:08 p.m. It totaled 380,048 contracts Feb. 21, 24 percent below the three-month average. Open interest was 1.63 million contracts.
Source: Bloomberg
