West Texas Intermediate oil pared gains after an Energy Information Administration report showed that U.S. inventories gained last week as production rose. Supplies at the hub in Cushing, Oklahoma, dropped to the lowest level of the year.
WTI retreated as the EIA, the Energy Department’s statistical arm, said supplies increased 2.62 million barrels to 384 million. The report was projected to show a 2.3 million-barrel gain, according to a Bloomberg survey. Crude output rose 66,000 barrels a day to 7.16 million in the week ended March 8, the most since 1992. The International Energy Agency cut its 2013 global demand estimate by 60,000 barrels a day to 90.6 million. The IEA said OPEC output grew 150,000 barrels a day in February.
“An inventory build will send crude lower,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “We should test yesterday’s lows for the front-month WTI contract.”
Crude oil for April delivery rose 50 cents, or 0.5%, to $93.03 a barrel on the New York Mercantile Exchange. The contract traded at $93.20 before the release of the EIA report at 10:30 a.m. in Washington. Futures ranged from $91.60 to $93.47 yesterday. Trading was 28% above the 100-day average for the time of day.
Brent oil for April settlement dropped 14 cents to $109.51 a barrel on the London-based ICE Futures Europe exchange. Futures touched $109.06, the lowest level since Dec. 26. April futures expire tomorrow. Trading was 10% above the 100-day average.
The European benchmark grade traded at a $16.48 premium to WTI. Brent’s premium slipped for a fifth day yesterday to $17.11, the narrowest closing gap since Jan. 30.
Crude supply has increased for eight consecutive weeks. Output has surged as the combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in states including North Dakota, Texas and Oklahoma.
Crude stockpiles at Cushing, the delivery point for New York futures, decreased 1.53 million barrels to 49.3 million. Supplies at the hub rose to a record 51.9 million in the week ended Jan. 11.
Refineries operated at 81% of capacity in the seven days ended March 8, down 1.2 percentage points from the prior week. Units are often idled for maintenance in February as attention shifts away from heating oil and before gasoline consumption rises.
Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.