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.
U.S. gasoline stockpiles dropped by 3.57 million barrels to 224.3 million last week, according to the EIA. They were forecast to decrease 1.2 million barrels, according to the median estimate of 11 analysts surveyed by Bloomberg.
The IEA today curbed estimates for global fuel consumption in 2013, predicting demand will increase by 820,000 barrels a day amid “elusive” economic growth.
The 12 members of the Organization of Petroleum Exporting countries pumped 30.49 million barrels a day in February, up from January’s output of 30.34 million, the IEA said in its monthly oil market report. Iraqi output rose 6% to 3.14 million barrels a day in February, up from 2.97 million barrels the previous month, according to the IEA.
“Rising OPEC production is putting downward pressure on Brent,” Armstrong said.
Brent, the benchmark for half the world’s oil, is more sensitive to changes in Middle Eastern and North African production because Europe has a greater dependence on supplies from the region.
Saudi Arabia, Iraq and Kuwait, OPEC’s biggest producers, are in talks to ship extra crude to India as the nation prepares to halt purchases from Iran because of global sanctions, four people with knowledge of the matter said.
Indian refiners, which are waiting for an order from the oil ministry to stop buying Iranian cargoes, are discussing annual term contracts with the countries for the year starting April 1, the people said this week, asking not to be identified because the information is confidential.
Iranian oil shipments advanced 13% last month even as the U.S. implemented sanctions complicating sales from the Persian Gulf country, the IEA said. Countries purchased 1.28 million barrels a day from Iran in February, compared with an upwardly revised 1.13 million in January.
WTI may extend gains as a measure of technical momentum increases. The moving-average convergence divergence indicator is above its signal line today for the first time since Feb. 1, according to data compiled by Bloomberg. Investors typically buy contracts on a so-called bullish MACD crossover. Crude advanced from around $88 a barrel to above $98 over six weeks from mid- December after a similar chart pattern.