West Texas Intermediate oil in New York dropped after the Energy Information Administration said U.S. crude output rose to the highest level in 20 years.
Prices declined 0.5% as production climbed to 7.06 million barrels a day last week, the most since December 1992, according to the EIA, the Energy Department’s statistical arm. Crude stockpiles rose 560,000 barrels to 372.2 million. Fuel supplies fell as demand grew to the highest level this year. Oil peaked earlier as data showed U.S. retail sales gained.
“The market is well supplied and demand is OK, although not spectacular,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at Manulife Asset Management in Boston. “The focus will turn back to the economic growth outlook.”
Crude oil for March delivery fell 50 cents to settle at $97.01 a barrel on the New York Mercantile Exchange. Futures have declined 3.9% in the past year. The volume of all contracts traded was 34% above the 100-day average at 3:27 p.m.
Brent oil for March settlement, which expired today, rose 6 cents to $118.72 a barrel on the London-based ICE Futures Europe exchange. The more actively traded April contract increased 13 cents to end the session at $117.88. Volume was 2.7% above the 100-day average.
The European benchmark grade traded at a $21.71-a-barrel premium to WTI, up from $21.15 yesterday. The spread was $23.18 on Feb. 8, the widest level since Nov. 26.
U.S. production rose 67,000 barrels a day last week, the biggest increase since December, the report showed.
“We continue to see production gains but this has yet to translate into low prices,” said Marshall Berol, co-portfolio manager of the Encompass Fund in San Francisco, which has about $300 million in assets. “The limited impact of the production gain may be an indication that the economy is continuing to modestly pick up.”
The EIA report was projected to show a 2.2 million barrel increase in crude supplies, according to the median estimate of 10 analysts surveyed by Bloomberg.
Gasoline inventories declined 803,000 barrels to 233.2 million, according to the EIA. Stockpiles of distillate fuel, a category that includes heating oil and diesel, dropped 3.68 million barrels to 125.9 million. Refineries operated at 83.8% of capacity last week, down 0.4 percentage point from the prior week.