BLBG:WTI Oil Gains on Cyprus Deal; Brent Premium Narrowest Since July
West Texas Intermediate rose a second day after Cyprus agreed on an international bailout, easing concern that Europe’s debt crisis will worsen. Brent crude’s premium to WTI was near the narrowest since July.
WTI futures climbed as much as 0.6 percent in New York after capping a third weekly gain on March 22. Cyprus agreed on the outlines of an aid package with the European Union, European Central Bank and International Monetary Fund. Money managers raised bullish bets on WTI in the week ended March 19, according to the Commodity Futures Trading Commission. Morgan Stanley predicted a “marginal narrowing” of the difference between Brent and WTI, with the spread averaging $14.50 this year.
“If we see some recovery of the situation of the European crisis, including Cyprus and others, we will see the commodity markets be more positive,” said Tetsu Emori, a commodity fund manager at Astmax Investment Management Inc. in Tokyo. “Selling pressure has disappeared, and WTI has hit a bottom at around $90 a barrel. The market should be turning around, with upside to $94 a barrel.”
WTI for May delivery rose as much as 54 cents to $94.25 a barrel in electronic trading on the New York Mercantile Exchange and was at $94.16 at 8:38 a.m. London time. The volume of all futures traded was 34 percent below the 100-day average for the time of day. The contract advanced $1.26 to $93.71 a barrel on March 22, the highest close since March 18.
Cyprus Bailout
Brent oil for May settlement was at $108.15 a barrel, up 49 cents, on the London-based ICE Futures Europe exchange. The volume of all futures traded was 40 percent below the 100-day average. The European benchmark crude was at a premium of $14 to WTI. The difference was $13.95 on March 22, the narrowest since July 6.
Euro-area finance ministers approved the agreement between Cyprus and the so-called “troika” of international institutions in overnight talks in Brussels. The deal paves the way for 10 billion euros ($13 billion) of emergency loans and makes Cyprus the fifth country to tap a rescue since the euro debt crisis started in Greece in 2009. The European Union accounted for 16 percent of the world’s oil demand in 2011, according to BP Plc’s Statistical Review of World Energy.
“We should see more clearly the reach of the agreement during European trading,” Emori said. “Oil will react more positively.”
Pump Prices
Net-long positions in WTI held by money managers, including hedge funds, commodity pools and commodity-trading advisers, rose by 5,324 futures and options combined, or 3.2 percent, to 172,268, the CFTC’s Commitments of Traders report showed last week. They also increased bullish bets on gasoline for the first time in four weeks.
The average price for regular gasoline at U.S. pumps fell 3.2 cents a gallon in the past two weeks to $3.7074 cents, the second consecutive biweekly decline after nine weeks of increases, according to Lundberg Survey Inc. The average has risen about 44.95 cents a gallon since Dec. 21 and is 22.23 cents below the year-ago price of $3.9297, the figures from the Camarillo, California-based company show.
China agreed to double oil supplies from Russia and supported construction of a natural gas pipeline under agreements during President Xi Jinping’s first state trip abroad. OAO Rosneft, the world’s biggest traded oil producer by output, will borrow $2 billion from China Development Bank Corp., backed by 25 years of oil supplies, under accords signed March 22 in the Kremlin.
The Russian company also offered China National Petroleum Corp. access to Arctic resources, and OAO Gazprom said it plans to conclude a 30-year gas-supply contract to China by year-end.
Oil’s gain in New York may stall as prices approach technical resistance at the 50-day moving average, at $94.37 a barrel today, according to data compiled by Bloomberg. Sell orders are typically clustered near resistance levels.
To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
