LONDON: US crude fell below $97 a barrel to its lowest since July yesterday, outpacing a smaller drop in Brent futures, pressured by ample supplies and expectations of a further inventory buildup in the United States, the world’s top consumer.
Maintenance at US refineries and pipeline outages have led to an increase in domestic stocks, stretching Brent’s premium to the US benchmark also known as WTI to more than $13 a barrel, its widest since April.
US crude fell $1.73 to $96.57 and earlier reached $96.32, its lowest since July 1. Brent crude fell 23 cents to $109.74 a barrel by 1227 GMT, after hitting a session high of $110.06.
“The weakness in the Brent/WTI spread reflects refinery maintenance and growing crude stocks in the US,” said Christopher Bellew, an oil broker at Jefferies Bache.”
“Other bearish factors are the warm autumn in the northern hemisphere and Libyan oil coming back onto the market.”
A series of reports showing rising crude stocks has pressured prices. On Monday, the US government said they rose by 4 million barrels in the week to October 11 and increased at the Cushing storage hub for the first time since the end of June.
Brent could break below $109, Bellew said, and other analysts saw a weakening chart pattern for US crude. Its 200-day moving average at $98.62 is now a resistance level after prices fell below that mark.
“The technical picture in WTI is turning more negative as WTI broke the support of the 200-day moving average and it has its five-day moving average trending below the nine-day,” said Olivier Jakob, consultant at Petromatrix.
Analysts expect the US Energy Information Administration - returning to its normal schedule after the government shutdown — to report a further, 2.9-million-barrel increase in crude stocks for the latest week later yesterday.
Ahead of the EIA report at 1430 GMT, oil industry group the American Petroleum Institute said on Tuesday US crude stocks rose further last week by three million barrels.
Stockpiles also built in China, the second-largest oil consumer, in September, official news agency Xinhua said yesterday, as crude imports jumped to a record high.
Rising output of shale oil added to the picture of an amply supplied US market. The Eagle Ford formation in Texas has beaten North Dakota’s Bakken to the milestone of one million barrels per day, the EIA said.
Uncertainty over the future of Scotland’s Grangemouth refinery also supported Brent. The refinery provides steam to a plant which processes Forties, the largest crude oil stream underpinning Brent futures.
Reuters
