WTI hovers near 5-month low ahead of U.S. supply data, Fed stimulus, Libyan output

West Texas Intermediate crude rebounded from yesterdays five-month low after the American Petroleum Institute reported a much larger than expected drop in U.S. motor gasoline and distillate fuel supplies, despite a seventh consecutive weekly gain in crude inventories. Market players await the release of government statistics by the EIA later today, which are expected to show a smaller decrease in oil product stockpiles. Persisting supply outages from Libya continued to underpin the market but expectations for diplomatic progress between Iran and Western major powers in Geneva later this week eroded some of the risk premium. Speculations over an earlier-than-projected deceleration of Feds monetary stimulus after a recent string of upbeat data also capped gains.

On the New York Mercantile Exchange, WTI crude for delivery in December traded at $93.83 per barrel at 8:03 GMT, up 0.49% on the day. Prices held in range between days high of $93.98 and low of $93.36, near yesterdays five-month low of $93.11. The American benchmark lost 0.8% on Tuesday, a sixth consecutive daily retreat, but trimmed its weekly decline to little over 0.8% following Wednesdays rebound.

Meanwhile on the ICE, Brent futures for December settlement rose by 0.56% to $105.92 per barrel by 8:02 GMT. Prices shifted in a days range between $106.08 and $105.36 per barrel, near Mondays 4-month low of $105.13 a barrel. The European benchmark lost 0.5% on Tuesday but rose back to positive weekly territory after rising on Wednesday.

Oil prices drew some support after the industry-funded American Petroleum Institute reported on Tuesday a much steeper than expected fall in U.S. motor gasoline and distillate inventories, indicating robust demand in the worlds top consumer. According to the report, U.S. crude supplies rose by 871 000 barrels to 382.0 million in the week ended November 1, a seventh consecutive weekly gain. Stockpiles at Cushing, Oklahoma, the biggest U.S. storage hub and delivery point for NYMEX-traded contracts, surged by 999 000 barrels, a third weekly advance in a row.

However, the report also showed that motor gasoline inventories fell by 4.3 million barrels, while distillate fuel supplies slid by 2.73 million, both well above analysts expectations. The upbeat data revived hopes for an improvement in U.S. demand prospects, which drew investors back to the market.

Market players awaited government data by the EIA. The numbers which the industry-funded American Petroleum Institute provides are considered as less reliable than EIAs statistics as they are based on voluntary information from operators of refineries, pipelines and bulk terminals. According to a weekly Bloomberg survey of analysts prior to the government data, the EIA will likely report U.S. crude supplies rose for a seventh week by 2.1 million barrels to 386 million. Gasoline stockpiles are projected to have fallen by 400 000 barrels to 213.4 million, the lowest level in a year, while distillate fuel inventories probably dropped by 1.5 million barrels to 121.2 million.

Ken Hasegawa, a commodity sales manager at Newedge Japan, commented for CNBC: “We saw big declines in prices overnight. That and data showing a fall in U.S. gasoline and distillate stocks is encouraging people to come and buy back some positions. Overall, trading will remain in a tight range till some of the key economic numbers are out from the United States later this week.”

U.S. data

Investors will be keeping a close watch on this week’s highly anticipated U.S. data to gauge demand prospects in the worlds top consumer and also speculate when the Federal Reserve might begin scaling back its monthly bond purchases. On Thursday, the preliminary reading of the U.S. Q3 GDP growth may show a smaller expansion compared to the preceding three months. Personal Consumption Expenditures probably fell in the third quarter, while core consumer spending is expected to have advanced.

On Friday, October’s non-farm payrolls are projected to have further eased, while the unemployment rate likely inched up to 7.3%, according to analysts’ expectations. Personal income and personal spending are projected to have risen at a slower pace from a month ago. The preliminary reading of the Thomson Reuters/University of Michigan Consumer Sentiment Index may show a rebound to 74.5 in November, up from 73.2 in October.

Any better-than-expected readings will further fuel speculations for an earlier-than-projected stimulus tapering following the recent upbeat string of data, which strengthened the U.S. dollar and pressured down dollar-denominated commodities. The Institute for Supply Management reported on Tuesday that its Non-Manufacturing PMI rose to 55.4 in October, confounding analysts’ projections to slow to 54.0 from September’s reading of 54.4. Despite last month’s expansion being below August’s 2-1/2-year low, the upbeat reading fueled speculations that the U.S. economy is faring well despite the political wrangling in Washington we saw last month.

Yesterdays report added to ISM’s report from last week which showed manufacturing activity in the world’s biggest economy rose at the fastest pace in two and a half years in October. The ISM Manufacturing index surged to 56.4, the highest since April 2011, defying analysts’ projection for a drop to 55.0 from September’s reading of 56.2.

OPEC

Oil prices continued to draw support as persisting turmoil in Libya kept the nations crude exports at a fraction of its capacity, tightening global supply. Mohamed Elharari, a spokesman at the state-run National Oil Corp., said on Monday the country’s production pace fell to 200 000 barrels per day on November 3 after it was steady at around 600 000 for a month before the recent renewal of protests in some areas.

On Sunday, leaders of an autonomy movement in eastern Libya declared a regional government, challenging the weak central government. Heavy shooting in Tripoli on Tuesday between militias under state payroll also underlined the government’s current inability to control militia groups, fueling concern over stable supply from the African country.

However, optimism for a further thaw in relations between Iran and Western major powers at an upcoming meeting in Geneva on Thursday eroded some of oils risk premium.

The Islamic republic resumes negotiations with the U.S., U.K., Germany, France, Russia and China this week to end a decade-long deadlock over Irans nuclear program, which led to U.S. sanctions that crippled the nations crude exports and battered its economy. Irans top negotiator said that a framework deal with the six world powers was possible to be struck this week but it wouldnt be a disaster if there were a further delay.