BLBG:Crude Gains on Forecast Stockpile Drop as Cyclone Builds in Gulf of Mexico
Oil advanced from the lowest in more than a week in New York on speculation a storm building in the Gulf of Mexico poses a threat to supply in the U.S. amid shrinking crude stockpiles in the world’s biggest consumer.
West Texas Intermediate climbed as much as 0.7 percent before an Energy Department report tomorrow that may show inventories declined last week. Stockpiles fell 2.25 million barrels as Tropical Storm Lee shut production in the gulf, a Bloomberg News survey of analysts showed. Another disturbance in Mexico’s Bay of Campeche may become a tropical cyclone. Brent’s premium to U.S. prices widened from a record close.
“When production is withdrawn the price will naturally want to rise,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “Unless there is significant damage to fields it won’t be long-term. We are looking for WTI to trade within the $80 to $90 range.”
Crude for October delivery gained as much as 56 cents to $86.58 a barrel in electronic trading on the New York Mercantile Exchange and was at $86.37 at 1:32 p.m. Sydney time. The contract yesterday settled at $86.02, the lowest close since Aug. 26. Prices are 17 percent higher the past year.
Brent oil for October settlement was at $113.32 a barrel, up 43 cents, on the ICE Futures Europe Exchange. The contract yesterday increased $2.81 to $112.89. The European benchmark contract was at premium of $26.93 to U.S. futures, compared with yesterday’s record close of $26.87.
Gulf Output
Brent’s premium crude to WTI may shrink ‘within weeks’, judging by the narrowing difference of Canadian Syncrude to New York futures, according to Stephen Schork, president of the Schork Group Inc. Syncrude, a light, low-sulfur synthetic oil derived from the Alberta tar sands, has dropped 36 percent relative to WTI since rising to an $18 premium on Aug. 2.
About 60.5 percent of oil production and 41.6 percent of natural gas output from the Gulf of Mexico has been shut-in after Tropical Storm Lee passed through the region, the Bureau of Ocean Energy Management, Regulation and Enforcement said yesterday.
The disturbance in the Bay of Campeche has a 40 percent chance of strengthening into a tropical cyclone in the next two days, the National Hurricane Center said at 8 p.m. yesterday. The bay, where conditions are conducive for strong storms, holds rigs and platforms owned by Petroleos Mexicanos. The Gulf of Mexico is home to 27 percent of U.S. oil output and 6.5 percent of the country’s natural gas production.
The Energy Department is scheduled to release its weekly stockpile report at 11 a.m. tomorrow in Washington, a day late because of the Labor Day holiday on Sept. 5.
Gasoline inventories probably slipped 1.45 million barrels from 208.6 million barrels, according to the Bloomberg News survey of analysts. Distillate-fuel supplies, a category that includes heating oil and diesel, probably fell 200,000 barrels, the survey shows.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net
