WTI futures retreat as US crude inventories seen rising, supply shortages support

West Texas Intermediate crude fell for a third day in four ahead of a government report which may show US crude inventories rose for a sixth week, while supplies of refined petroleum products decreased. However, forecasts for another wave of cold weather across the US Midwest and the Great Plains provided some support. Supply disruptions in Libya, South Sudan and Nigeria also kept losses in check.

On the New York Mercantile Exchange, WTI crude for delivery in April fell by 0.63% to $102.17 per barrel by 8:22 GMT. Prices shifted in a daily range between $102.06 and $102.84 per barrel. The US benchmark added 0.6% on Monday, the first gain in three days, and settled at $102.82, the highest close since Thursday.

Meanwhile on the ICE, Brent futures for settlement in the same month lost 0.34% to trade at $110.26 per barrel, shifting in a range between days high and low of $110.11 and $110.64 a barrel. The European benchmark added 0.7% on Monday and settled at $110.64 per barrel, the highest close this year. Brents premium to its US counterpart widened to $7.82 a barrel on Monday from $7.65 on Friday, based on closing prices.

West Texas Intermediate was pressured amid expectations that US crude inventories jumped for a sixth week by 1.3 million barrels to 363.6 million in the seven days to February 21st, according to a Bloomberg survey of nine analysts ahead of EIAs report. Distillate fuel inventories, which include diesel and heating oil, are projected to have fallen by 1.5 million barrels, a seventh straight weekly decline, while motor gasoline supplies likely slid by 1 million barrels.

The industry-funded American Petroleum Institute will release its separate data later today. APIs figures however are considered as less popular than EIAs statistics as they are based on voluntary information from operators of pipelines, refineries and bulk terminals, while the government requires reports to be filed with the Energy Information Administration.

Tetsu Emori, a commodity fund manager at Astmax Investment, said, cited by CNBC: “After heating oil, the market will now look at gasoline demand and how that will help support oil prices. There will be some refineries shutting down for maintenance, but it is hard to predict the direction of oil at this point.”

Losses were also checked amid short-term weather forecasts pointing to below-average temperatures. According to Matt Rogers, the president of Commodity Weather Group LLC in Bethesda, Maryland, colder-than-usual weather will spread across the US Midwest and Great Plains in the next couple of weeks, bringing readings of as much as 15 degrees Fahrenheit beneath the usual. However, with the winter season drawing closer to an end, big moves to the upside are not very likely.

Analysts at Phillip Futures said in a note, cited by CNBC: “Investors are worried about the repercussions on crude oil demand when winter fades. On the other hand, upcoming summer maintenance in the United States and the North Sea refineries is likely to cause stockpiles to accumulate. This will weigh on crude oil prices.”

A brighter outlook for global economy growth also kept prices underpinned as the Group of 20 economies pledged to create tens of millions of jobs in the next five years, while generating an additional output of $2 trillion.

Reduced output in Libya kept the oil market supported, and especially the Brent benchmark. The African country, holder of the continents biggest crude reserves, produces an average of 231 000 barrels per day after renewed protests shut the western El Sharara oilfield on February 20th, the state-run National Oil Corporation said. That is down from the average of 600 000 bpd nationwide production before the 340 000-bpd field, Libyas second largest, was blocked once again.