West Texas Intermediate advanced, narrowing its discount to Brent crude to the lowest level in more than five weeks, as the euro trimmed losses against the dollar and OPEC increased production.
WTI gained for a fourth day as the euro stayed above $1.30. Brent’s premium to WTI narrowed for a fifth day, dropping to $17.11 a barrel from $20.79 in that time. Brent fell 0.5% after OPEC boosted its crude production to the highest level in three months in February. WTI futures open interest reached a record yesterday in New York.
“The real move is in that Brent-WTI spread,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “Oil is following currencies. I won’t be surprised to see that spread narrow a little bit more.”
WTI for April delivery gained 48 cents, or 0.5%, to settle at $92.54 a barrel on the New York Mercantile Exchange. Prices are up 0.8% this year. Volume was 36% above the 100-day average for the time of day at 2:36 p.m.
Brent for April settlement dropped 57 cents to $109.65 a barrel on the London-based ICE Futures Europe exchange. Volume was 29% above the 100-day average. Brent’s premium to WTI fell to $17.11, the lowest level since Jan. 30. The spread was $23.18 on Feb. 8.
The gap between Brent and WTI, which will average about $16 a barrel this year, will narrow to $9 in 2014 as new pipeline capacity lowers the cost of moving mid-continent crude to the Gulf Coast refiners, the Energy Information Administration, the Energy Department’s statistical arm, said in a monthly report today.
The euro fell 0.2% to $1.3026 after dropping as low as $1.2991. The currency decreased to $1.2955 on March 8, the weakest level since December. A stronger euro and weaker dollar increase the appeal of investing in oil.
“This currency move is the dominant force right now,” said John Kilduff, a partner at Again Capital LLC, a New York- based hedge fund that focuses on energy. “It’s been quite a reversal here in currencies and the currency move has had quite an effect on oil prices.”
Implied volatility for at-the-money WTI crude options expiring in May slid to 18.38%. The Standard & Poor’s GSCI Index of 24 commodities index added 0.1%.