WTI futures advance for a second day on US inventories data, freezing weather

West Texas Intermediate crude rose for a second day on Wednesday after the industry-funded American Petroleum Institute reported a sixth consecutive weekly decline in US crude inventories, despite a larger-than-projected build in both gasoline and distillate fuel stockpiles. The coldest US weather in 20 years caused supply disruptions at several US and Canadian refineries, while boosting demand for oil as well. Prices were also supported on the upside by ongoing tension in Libya, despite a recent reopening of a major oilfield, which as much as doubled nationwide output. A stronger dollar capped gains.

On the New York Mercantile Exchange, WTI crude for delivery in February traded at $93.96 per barrel at 8:18 GMT, up 0.30% on the day. Prices shifted in a daily range between $94.18 and $93.86 a barrel. The US benchmark snapped five straight days of declines on Tuesday and rose by 0.3%, trimming its weekly decline to 0.3% on Wednesday.

Meanwhile on the ICE, Brent crude for settlement in the same month added 0.19% to trade at $107.55 at 8:17 GMT. Prices held in a range between days low and session high of $107.37 and $107.75 per barrel respectively. The European benchmark jumped by little over 0.3% on Tuesday and extended its weekly advance to 0.5% following Wednesdays advance. Brents premium to its US counterpart narrowed to $13.44 yesterday, the first decline in six days.

US crude drew support on expectations the EIA will report later today US inventories fell for a sixth straight week in the seven days through January 3rd. The industry-funded American Petroleum Institute reported late-Tuesday that crude supplies fell by 7.31 million barrels last week, offsetting a much-larger-than-expected build in refined products. Motor gasoline stockpiles surged by 5.17 million barrels, while distillate fuel inventories, including diesel and heating oil, added 5.58 million, a week after they rose to the highest in two months.

APIs report however is deemed less popular than EIAs data as it is based on voluntary information provided by operators of refineries, pipelines and bulk terminals, while the government requires reports to be filed with the EIA.

According to the median estimate of ten analysts who participated in a weekly Bloomberg News survey, the Energy Information Administration will report that US crude inventories fell by 2.75 million barrels last week, while motor gasoline and distillate fuel stockpiles rose by 2.5 million and 2.25 million barrels, respectively.

Cold weather

The market also drew support as cold weather in the US unseen in almost 20 years disturbed operations at processing units, while also boosting demand for heating oil and gasoline as drivers keep tanks filled and run engines longer to warm up.

The freezing temperatures have prompted pipeline operators to reduce flows and refineries to reduce production. Operations at at least five refineries in the US and Canada were affected by the cold weather which cause malfunctions and full closure at some units.

Ric Spooner, a chief analyst at CMC Markets in Sydney, said for Bloomberg: “The market is hanging around support levels and we’ll wait to see what happens with the official inventory figures. The weather will be “positive in terms of an increased use of heating oil.”

Libyan output

The oil market, and especially the Brent benchmark, gained support by renewed supply worries in Libya, holder of Africas biggest crude reserves. Although nationwide production as much as doubled to over 500 000 bpd after the reopening of the El Sharara oilfield, a rare negotiation success for Prime Minister Ali Zeidan, ongoing tension and supply uncertainty continued to put a floor under prices.

The Libyan navy intercepted an illegal attempt to load a tanker from the rebel-held Es Sider port earlier in the week. In an escalation of tension in the African country, the navy opened fire on Monday as a Malta-flagged vessel attempted to approach the export terminal, warning it against loading oil from units not under the control of National Oil Corp.

Meanwhile, a heavily armed autonomy group in eastern Libya invited foreign companies to buy oil from export terminals they previously seized, challenging the central government to use force to stop them.

Tetsu Emori, a commodities fund manager at Astmax Investments, said, cited by CNBC: “The situation looks quite uncertain, and I dont think exports will resume smoothly. Along with increased tension in Iraq and the possible negative impact on oil exports there, oil prices will probably stay supported.”