Traders take advantage of backward-dated WTI

West Texas Intermediate oil (NYMEX:CLQ14) fell as investors sold September crude before expiration and purchased cheaper contracts for future delivery. Brent (NYMEX:SCQ14) was little changed after falling yesterday to the lowest level in almost 14 months.

The front month’s premium over the next month narrowed from the highest since 2008. September WTI crude futures (NYMEX:CLU14) expire tomorrow. Brent plunged yesterday as Kurdish and Iraqi forces regained control of Iraq’s largest dam, stalling an advance by Islamic State militants.

“Nobody’s interested in taking crude for September delivery,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “If you don’t need the physical barrels, you are going to sell. The spread has been all over the place the last few days as expiration approaches.”

WTI for September delivery fell 53 cents, or 0.6%, to $95.88 a barrel at 9:32 a.m. on the New York Mercantile Exchange. The more-active October contract climbed 13 cents to $93.88. The September contract settled $2.66 higher than its October counterpart yesterday, the widest premium between front-month and second month futures since September 2008.

Brent for October (NYMEX:SCV14) settlement slipped 16 cents to $101.44 a barrel on the London-based ICE Futures Europe exchange. It decreased 1.9% to $101.60 yesterday, the lowest settlement since June 25, 2013. The European benchmark crude traded at a $7.56 premium to WTI for the same month.
 

U.S. Stockpiles
 

U.S. crude stockpiles probably fell 2 million barrels last week, according to the median of nine analysts responses in a Bloomberg survey before an Energy Information Administration report tomorrow.

Gasoline (NYMEX:RBQ14) inventories probably slipped 1.6 million barrels in the week ended Aug. 15, according to the survey. Supplies of distillate fuel, a category including heating oil and diesel, are forecast to have decreased 400,000 barrels.

Refinery utilization probably slid by 0.5 percentage points to an average 91.1% of capacity, the survey shows. That would be the lowest rate since June. The industry-funded American Petroleum Institute in Washington is scheduled to release separate supply data today.

CVR Energy Inc.’s refinery in Coffeyville, Kansas, is restarting operations, Genscape Inc. said yesterday. Activity at some units at the plant appears to be nearing operational levels, Genscape said. WTI declined to a two-week low on July 29 after a fire halted the 115,000 barrel-a-day refinery, prompting speculation that inventories at Cushing, Oklahoma, the delivery point for WTI traded in New York, would climb.
 

Limited Strikes
 

The U.S. will continue “limited” air strikes against Islamic State insurgents in Iraq, President Barack Obama said yesterday. The U.S. conducted 35 fighter, bomber and drone attacks over the past three days, disrupting their approach on the city of Erbil and allowing Iraqi and Kurdish forces to recapture the Mosul dam.

The conflict in Iraq, the second-biggest producer in the Organization of Petroleum Exporting Countries, has spared the south, home to about three-quarters of its crude production. The nation pumped 3 million barrels a day last month, data compiled by Bloomberg show.

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