BLBG: Oil Falls as Traders Sell October Futures Before Expiry Today
By Christian Schmollinger
Sept. 21 (Bloomberg) -- Oil fell in New York as traders sold the October future that expires today after short-term supply concerns dissipated because Enbridge Energy Partners LP started a pipeline supplying the U.S. Midwest.
Crude retraced part of its 1.6 percent gain yesterday as traders sold contracts after buying last week to cover the threat of supply disruptions caused by the shutdown of Enbridge Energy Partners’ 6A, which carries 670,000 barrels a day, or about one-third of Midwest imports. The line resumed Sept. 17.
“Only the front month, or October contract, is very weak,” said Ken Hasegawa, a commodity derivative sales manager at broker Newedge in Tokyo. “Traders want to see the next month contract and that is unchanged. After Enbridge restarted that put a lot of pressure on the front month.”
The October contract for West Texas Intermediate oil dropped as much as 67 cents, or 0.9 percent, to $74.19 a barrel in electronic trading on the New York Mercantile Exchange, and was at $74.23 at 1:43 p.m. Singapore time. Yesterday it climbed $1.20 to $74.86, the biggest gain since Sept. 10. Prices are down 6.4 percent this year.
The more active November future was at $75.97 a barrel, down 22 cents.
Concerns about the rate of U.S. economic expansion are holding back gains in crude markets. The worst recession in the country since the Great Depression ended in June 2009, the National Bureau of Economic Research said yesterday. The group didn’t conclude that the “economy has returned to operating at normal capacity,” it said.
The U.S. is the world’s largest oil consumer, using 19.5 million barrels a day of fuels in the week ended Sept. 10.
Brent Premium
Brent crude oil for November settlement traded at $79.21, down 11 cents, on the London-based ICE Futures Europe exchange. It rose $1.11, or 1.4 percent, to $79.32 yesterday.
The grade’s premium to the New York November contract has climbed to $3.27 a barrel today from $3.13 yesterday.
European gasoil futures for October traded on London’s ICE exchange are at a premium of $1.25 to November, a situation known as backwardation where prompt supplies are more expensive than later deliveries. This suggests an increase in demand for oil products.
“Relatively, the products in Europe are much stronger than the U.S.,” Hasegawa said. “You’re seeing cash gasoline markets in Chicago falling down after the Enbridge restart. That’s the difference between the U.S. and European markets and that reflects the large difference between WTI and Brent.”
An Energy Department report tomorrow will probably show that stockpiles of distillate fuel, including heating oil and diesel, increased 250,000 barrels last week, a Bloomberg News survey shows, the first increase in four weeks.
U.S. crude supplies probably slipped 1.6 million barrels from 357.4 million, according to the survey. Gasoline stockpiles decreased 250,000 barrels from 224.5 million, the survey shows.
Refineries probably operated at 86.8 percent of capacity, down 0.8 percentage point from the previous week, according to the survey. It would be the lowest utilization rate since the week ended April 16.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net
