By MOMING ZHOU
West Texas Intermediate crude rose to the highest in almost
three weeks as strong refinery
demand reduced US
inventories. The US benchmarks discount to Brent
narrowed to a three-month low.
Prices gained for a third time in four days. US refineries
operated at the highest rate in nine years in the week ended
July 11, according to the Energy Information Administration.
Crude inventories at Cushing, Oklahoma, the delivery point
for WTI, dropped to a six-year low as oil flowed to the Gulf
Coast where prices were higher.
The supply side really should keep us higher,
said Phil Flynn, senior market analyst at the Price Futures
Group in Chicago. Cushing is the delivery point so the
drawdown there is giving the market a boost. The drop at
Cushing is definitely favoring WTI over Brent.
WTI for August delivery, which expires tomorrow, gained
$1.46, or 1.4%, to $104.59/bbl on the New York Mercantile
Exchange, the highest settlement since July 1. The
more-active September future was up 91 cents at $102.86. The
volume of all futures was about 27% above the 100-day
August futures were $1.73 higher than September, the biggest
spread between a front-month and second-month contract since
WTI to me is reacting to the expiration thats
going to happen tomorrow, said Andy Lipow, president of
Lipow Oil Associates, an energy consulting firm in Houston.
Brent for September settlement gained 44 cents to end at
$107.68/bbl on the London-based ICE Futures Europe
exchange. The volume of all
futures traded was about 1% below the 100-day average for the
time of day. September WTI was at a discount of $4.82 to
Brent, down from $5.29 on July 18 and the narrowest since
WTI was $6.20 below Light Louisiana Sweet crude on the Gulf
Coast on July 21, the biggest discount since February,
according to data compiled by Bloomberg.
Inventories at Cushing dropped 650,000 bbl in the week ended
July 11 to 20.3 million, the lowest since 2008, according to
the EIA, the Energy Departments statistical arm. Total
US stockpiles fell 7.53 million, the biggest decline since
US refineries operated at 93.8% of their capacity in the week
ended July 11, the highest since 2005.
Total crude stockpiles probably dropped 2.8 million bbl in
the week ended July 18, according to a Bloomberg
survey before the EIA releases the weekly report on July 23.
Expectations that US crude oil inventories will
continue falling on strong refinery
runs remains a more
confident motivation for WTI buyers than the geopolitical
threats to Brent-related supply, said Tim Evans, an
energy analyst at Citi Futures Perspective in New York.
President Vladimir Putin defied international anger over
Russias alleged role in the shooting down of a Malaysia
Air flight in Ukraine as the US and Europe
sanctions against his increasingly isolated country.
Geopolitical risk is right now the driver of the
market, said Gene McGillian, an analyst and broker at
Tradition Energy in Stamford, Connecticut.
Brent and WTI jumped on July 17 after the airplane was shot
down. The crash site at Grabovo, fewer than 60 miles from
Russia, has become a focus of international outrage as armed
rebels hovered over the investigation, making reclamation of
wreckage and corpses more difficult. A total of 282 bodies
have been found, the Ukrainian government said on July 21.
Russias relations with the rest of the world are
deteriorating four months after its annexation of
Ukraines Crimea region sparked Europe
s biggest geopolitical
crisis since the end of the Cold War.
The concern about Russia is keeping the market
higher, said Flynn.