BLBG:Brent Crude Set for Second Weekly Drop to Shrink Premium to WTI
Brent crude headed for a second weekly decline, cutting its premium to West Texas Intermediate to an eight-month low, amid concern that Europe’s struggle to resolve the banking crisis in Cyprus will hurt growth.
Brent futures slipped as much as 0.5 percent, bringing its loss this week to 2.5 percent. WTI was poised for its first weekly drop since March 1. Cypriot lawmakers start a debate today on ways to unlock bailout funds to avoid a financial collapse that threatens to worsen Europe’s debt turmoil. Libya shut two oil fields because of fighting, according to a report yesterday from LANA, the state news agency.
“Developments in Cyprus have certainly weighed” on oil prices, said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA in London, who forecasts that Brent will average $114 a barrel this quarter. “Once the Cyprus issue is resolved and ultimately it will have to be resolved,” crude is likely to recover, he said.
Brent for May settlement was at $107.11 a barrel, down 36 cents, on the London-based ICE Futures Europe exchange as of 9:03 a.m. local time. The volume of all futures traded was 6 percent below the 100-day average for the time of day. The grade has lost 3.3 percent this year. The European benchmark’s premium to WTI fell as low as $14.57, the narrowest since July.
WTI for May delivery was at $92.54 a barrel, up 9 cents, in electronic trading on the New York Mercantile Exchange. The volume of all futures traded was 45 percent below the 100-day average. The contract slid $1.05 to close at $92.45 yesterday. Prices are down 1 percent this week.
Brent Bottom
“Brent is in a weak situation and, on the other side, WTI is rangebound,” said Ken Hasegawa, an energy-trading manager at Newedge Group in Tokyo. “There’s still a lot of uncertainty over the euro-zone debt situation, so we can’t confirm a bottom for Brent crude. It might continue to decline next week.”
The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s oil, will cut shipments by 0.2 percent through early April as maintenance at refineries in Asia peaks, according to a weekly report from Oil Movements, a tanker tracker.
Exports will fall to 23.72 million barrels a day in the four weeks to April 6, Oil Movements said. The figures exclude Angola and Ecuador. Middle East shipments will drop 0.2 percent to 17.37 million barrels a day in the period, the report also showed. That figure includes non-OPEC members Oman and Yemen.
Emergency Loans
Cyprus is trying to raise 5.8 billion euros ($7.5 billion) needed to trigger emergency loans from the European Central Bank to avoid a financial crisis. The country became in June the fifth euro-area nation to request a rescue. The European Union accounted for 16 percent of the world’s oil consumption in 2011, BP Plc (BP/)’s Statistical Review of World Energy shows.
WTI will probably fall next week on concern that slower European growth will weaken the U.S. economy and curb fuel demand, a Bloomberg survey showed. Fifteen of 31 analysts, or 48 percent, forecast crude will drop through March 29. Nine respondents, or 29 percent, predicted a gain. Seven said there would be little change.
Prices declined even as state-run LANA reported that Libya shut oil fields in Zalaa, citing Ahmed al-Mismari, a spokesman for border patrol and oil-facilities guards. Armed clashes took place at an oil field owned by Libya’s Waha Oil Co. this week after unidentified gunmen attacked security forces at the facility, Egypt’s state-run Middle East News reported March 19, citing company officials.
China’s crude stockpiles fell 2.9 percent in February, according to the China Oil, Gas & Petrochemicals newsletter published by the official Xinhua News agency. Inventories slid to 28 million tons, or 205 million barrels, the lowest level in a year, according to Bloomberg calculations based on the data.
To contact the reporter on this story: Ramsey Al-Rikabi in Singapore at ralrikabi@bloomberg.net Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Raj Rajendran at rrajendran4@bloomberg.net
