WTI oil gains, Brent premium narrows; Seaway pipeline starts

by on January 14, 2013 5:25 am GMT

Oil gained in New York, heading for the highest close since September, while Brent crude’s premium to West Texas Intermediate fell to a four-month low after the start of a pipeline that may reduce a glut in the U.S. Midwest.

WTI futures climbed as much as 0.8 percent after a fifth weekly gain, the longest run of advances since August. The 500 mile (805 kilometer) Seaway line running from Cushing, Oklahoma, to Freeport, Texas, resumed full service after shutting Jan. 2 to expand its capacity to 400,000 barrels a day from 150,000 barrels, Enterprise Products Partners LP (EPD) and Enbridge Inc. (ENB) said Jan. 11. Hedge funds boosted bullish bets on oil to the highest level in more than three months, according to a report from the Commodity Futures Trading Commission.

“We’re seeing further contraction of the spread between West Texas and Brent, reflecting the infrastructure build going on in the U.S.,” said Michael McCarthy, a chief market strategist at CMC Markets in Sydney. “We’re seeing positive momentum maintained for the West Texas contract.”

Crude for February delivery rose as much as 70 cents to $94.26 a barrel and was at $94.14 in electronic trading on the New York Mercantile Exchange at 12:39 p.m. Singapore time. Volume for all contracts was 40 percent higher than the 100-day moving average. Prices fell 26 cents to $93.56 on Jan. 11 and climbed 0.5 percent last week.

Brent for February settlement was at $110.97 a barrel, up 33 cents, on the London-based ICE Futures Europe exchange. The number of contracts changing hands was more than double the 100- day average. The European benchmark contract was at a premium of $16.83 to WTI. It closed at $17.08 on Jan. 11, the narrowest gap since Sept. 19.

Oil Glut

WTI dropped 7.1 percent in 2012 as the U.S. shale boom deepened the glut at Cushing, America’s largest storage hub and the delivery point for WTI. That left it at an average discount of $17.47 a barrel to Brent last year, compared with a premium of about 7 cents in the five years through 2010. Brent, the benchmark grade for more than half the world’s crude, climbed 3.5 percent last year.

Crude stockpiles at Cushing rose to a record 50.1 million barrels in the week ended Jan. 4, Energy Department data show.

Money managers raised net-long positions, or wagers that the U.S. benchmark crude will gain, by 12 percent in the week ended Jan. 8, according to the CFTC’s Jan. 11 Commitments of Traders report. Net-long positions held by money managers, including hedge funds, commodity pools and commodity-trading advisers, jumped by 18,173 futures and options combined to 168,066.

Gasoline Prices

Crude also advanced before a report today that may show industrial production in the euro area rebounded in November. Output probably climbed 0.2 percent from October, after sliding the prior two months, according to a Bloomberg survey of 37 economists before official figures are released by the European Union’s statistics office in Luxembourg.

The average price for regular gasoline at U.S. pumps increased by 6.68 cents a gallon in the past three weeks to $3.3247 as a rally in oil prices led refiners to boost costs for fuel marketers, according to Lundberg Survey Inc. The survey covers the period ended Jan. 11 and is based on information obtained from about 2,500 stations. The gain is the first in 11 weeks

WTI’s advance may stall as a technical indicator continues to show futures have risen too quickly for further gains to be sustainable. The 14-day relative strength index remains close to 70, a reading that signals a market is overbought and may decline. Crude fell on Jan. 11 after the RSI climbed above 70 the previous day for the first time since August.