WTI Falls as Cushing Crude Supply Rises a Fourth Week

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West Texas Intermediate fell after a government report showed that crude inventories at Cushing, Oklahoma, the delivery point for the contract, increased a fourth week.

Supplies at the hub rose by 508,000 barrels to 20.7 million in the week ended Aug. 22,, according to the Energy Information Administration. Nationwide crude stockpiles fell by 2.07 million barrels to 360.5 million barrels, the report showed. The EIA forecasts U.S. output will reach 9.28 million barrels a day in 2015, the highest annual average since 1972. Fighting in eastern Ukraine between government forces and pro-Russian rebels raged on after the Russian and Ukrainian presidents hailed as “positive” talks on ending the conflict.

.S. refineries operated at 93.5 percent of their capacity last week, up 0.1 percentage point from Aug. 15, according to the EIA. The amount of crude processed rose to a record.

We have sufficient crude supplies and growing production here,” Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at John Hancock in Boston, said by phone. “This has tempered the impact of unrest in all the hot sports out there. Prices would be much higher if these events occurred a few years ago before U.S. output rose.”

The increase in Cushing was almost double the amount reported by an industry group on Tuesday and weighed on U.S. oil futures, even as the total fall supported international benchmark Brent.

Gasoline stocks fell but not by as much as expected, while distillates including diesel and heating oil rose.

"The larger-than-expected build at Cushing and decline in gasoline demand are negatives, as is the smallish gasoline drawdown," said John Kilduff, a partner at Again Capital LLC in New York.

WTI for October delivery slipped 21 cents to $93.65 a barrel at 11:42 a.m. on the New York Mercantile Exchange. Futures traded at $94.15 before the release of the report at 10:30 a.m. in Washington. The volume of all futures traded was 42 percent below the 100-day average for the time of day.

Prices have fallen so much the market is vulnerable to any supply surprises, including the new Buzzard work," said Andrey Kryuchenkov at VTB Capital in London.

Global oil supplies have been ample for much of the summer, despite violence in OPEC members Iraq and Libya, capping gains.

Barclays analysts said in a note that oil output was picking up from OPEC countries most likely to face supply bottlenecks such as Iran, Libya, Iraq and Nigeria.

Disrupted supply from these countries totalled less than 400,000 barrels per day in July, down from 1.6 million bpd in September last year, they said.

Libya's oil production has been increasing in the past few weeks despite a split between an Islamist faction in Tripoli and the newly elected parliament, following air strikes attributed to Egypt and the United Arab Emirates.

Adding to rising supplies, Iraqi Kurdistan has already managed to deliver four large cargoes since May, despite Baghdad's efforts to block sales even as violence becomes worse in Iraq.
In Syria, the United States was preparing military options to pressure Islamic State militants.
In Minsk, talks between Russia and Ukraine could suffer a setback after Ukraine released footage of Russian soldiers being captured.

"We are seeing softer-than-expected demand, and in the absence of any further disturbing developments in geopolitical areas, the pressure remains on the energy complex," said Michael McCarthy, chief strategist at CMC Markets in Sydney.

Source: Bloomberg; Reuters