West Texas Intermediate crude (NYMEX:CLN14) headed for a record-long slump as supply concerns eased in Iraq and Libya and inventories at Cushing, Oklahoma, rebounded from a five-year low. Brent (NYMEX:SCN14) also declined.
Futures dropped for a 10th day, poised for the longest retreat since the contracts began trading in 1983. Libya’s production rose as output from the western Sharara field climbed, National Oil Corp. said. The fighting in Iraq hasn’t spread to the south, home to more than three-quarters of its crude output. Stockpiles at Cushing, WTI’s delivery point, rose last week by the most since January, government data showed yesterday.
“The market continues to retreat as geopolitical premium is pushed out of the market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The fundamentals weren’t supportive. Yesterday’s slightly bearish oil inventory report is also weighing on the market.”
WTI for August delivery dropped 30 cents, or 0.3%, to $101.99 a barrel at 9:25 a.m. on the New York Mercantile Exchange. The contract slid $1.11 to $102.29 yesterday, the lowest close since May 16. The volume of all futures traded was about 13% above the 100-day average for the time of day.
Brent for August settlement slid 28 cents to $108 a barrel on the London-based ICE Futures Europe exchange. Volume was 30% above the 100-day average. The European benchmark crude traded at a premium of $5.95 to WTI on the Intercontinental Exchange. The spread widened for the first time in four days yesterday to close at $5.99.
Libya’s production rose to 350,000 barrels a day from 325,000 yesterday, National Oil spokesman Mohamed Elharari said by phone in Tripoli. The nation’s output will rise toward 1 million barrels a day after Sharara restarted and the Es Sider and Ras Lanuf terminals resume exports, according to estimates from Petromatrix GmbH, a Vienna-based consulting firm.
Libya, which has regained control of the terminals seized by rebels, plans to increase shipments gradually to avoid disrupting the market, Samir Kamal, the nation’s governor to OPEC, said July 8.
In Iraq, OPEC’s second-largest oil producer, the risk of civil war flared last month after the Sunni al-Qaeda breakaway, now known as the Islamic State, seized Mosul on June 10 and advanced towards Baghdad. WTI settled at $107.26 on June 20, the highest since September 2013.
The Organization of Petroleum Exporting Countries predicted that demand for its crude will decline in 2015 to the lowest in six years as supplies from other producers, led by the U.S., are more than enough to cover the increase in global consumption. The need for OPEC crude will slide to 29.4 million barrels a day next year, the group said in its first assessment of 2015.
Crude inventories at Cushing climbed by 447,000 barrels last week to 20.9 million, the Energy Information Administration reported yesterday. That’s the biggest gain since January.
“Inventories at Cushing increased unexpectedly and WTI is reacting to that,” said Amrita Sen, chief oil markets analyst at consultant Energy Aspects Ltd. “The stockpile increase came as a result of reduced flows out of Cushing on the Seaway pipeline following a two-day outage.”
Consumption of gasoline (NYMEX:RBN14) shrank by 233,000 barrels a day to 8.94 million, the EIA said. The peak U.S. driving season typically starts on Memorial Day, which was May 26 this year, and runs through Labor Day on Sept. 1.