WTI futures swing on US economic prospects, inventories data eyed

West Texas Intermediate swung between gains and losses on Wednesday amid speculations a government report will show US crude inventories fell for a seventh week and as upbeat US data supported the view the US economic recovery is sustainable. The oil complex however was weighed on by prospects of a rise in Iranian exports as diplomats continued to achieve progress in a deal on curbing the Islamic republics nuclear program.

On the New York Mercantile Exchange, WTI crude for delivery in March was mostly unchanged on the day at $92.83 per barrel at 8:15 GMT, after shifting between days high and low of $92.88 and $92.63 per barrel. The US benchmark added 0.8% on Tuesday, supported by upbeat US data, trimming its weekly decline to less than 0.1%.

Meanwhile on the ICE, Brent crude for settlement in the same month was down 0.2% by 8:16 GMT and stood at $105.39 per barrel. Prices held in a narrow daily range between $105.50 and $105.23 a barrel. The European benchmark slid by 0.3% on Tuesday and was down 2% on weekly basis. Brents premium to its US counterpart narrowed to $12.82 yesterday, based on closing prices.

West Texas Intermediate crude drew support after the industry-funded American Petroleum Institute reported on Tuesday a seventh consecutive withdrawal in US crude inventories. Supplies fell by 4.41 million barrels in the seven days through January 10th, the API said, while motor gasoline inventories added 5.36 million. Distillate fuel inventories, including diesel and heating oil, fell by 1.7 million barrels last week, the group said.

API’s statistics however are deemed less popular than EIA’s numbers as they are based on voluntary information provided by operators of refineries, pipelines and bulk terminals, while the government requires reports to be filed with the EIA.

The Energy Information Administration will report a 1.3-million decline in US crude inventories last week, according to the median estimate of 11 analysts surveyed by Bloomberg. Distillate fuel stockpiles, a closely watched component during the winter season, likely added 1.25 million barrels, while motor gasoline supplies are expected to have increased by 2.5 million.

US crude received a lift yesterday on prospects of increased demand after data by the Census Bureau, part of the US Department of Commerce, showed that retail sales increased 0.2% in December, exceeding analysts’ expectations for a 0.1% jump. Novembers reading received a downward revision to 0.4%, down from initially estimated at 0.7%, but nevertheless capped what could be the strongest quarter of consumer spending in three years.

Data also showed that core retail sales, or those excluding automobiles, increased 0.7% in December, after they had been revised downward to 0.1% from earlier estimates of 0.4% increase in November. Retail sales are considered as a crucial indicator regarding the trend in consumer spending and overall economic development in the United States. Consumer spending accounts for almost 70% of the US economy.

Ken Hasegawa, an energy trading manager at Newedge Group in Tokyo, commented, cited by Bloomberg: “Some economic indicators, such as those in the U.S., are getting better. Oil could go down further, but it is also likely to be supported by economies improving.”

Nuclear deal

The oil market remained pressured to the downside amid concerns over the return of as much as 1 million bpd of Iranian oil on the global scene. The preliminary agreement between Iran and the five permanent UN Security Council members and Germany goes into force on January 20th, Irans Foreign Ministry and the European Union announced on Sunday.

A diplomatic source said on Monday that the counterparts will start talks on finalizing the settlement in February.

Meanwhile in Libya, Prime Minister Ali Zeidan said on Tuesday the government would give intermediaries a chance to end the conflict with protesters blocking the countrys eastern export terminals, seeking a peaceful resolution to the standoff. One of the latest escalations of tension resulted in the death of the country’s deputy industry minister, Hassan al-Drowi, who was killed by gunmen on Saturday.