West Texas Intermediate crude is headed for the lowest close in 17 months before a government report that may show U.S. inventories increased last week. WTI’s discount to Brent widened.
U.S. crude inventories expanded by 2 million barrels in the week ended Oct. 3, a Bloomberg News survey showed before Energy Information Administration data tomorrow. The EIA cut its crude price forecasts today in a monthly report because of rising output and reduced demand. The International Monetary Fund cut its outlook for 2015 global growth. The Brent-WTI spread rose to near $3. “The spread is widening in anticipation of a build in inventories,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “Supply is adding pressure to WTI. We are in a downtrend here and it may accelerate.”
WTI for November delivery fell $1.20, or 1.3 percent, to $89.14 a barrel at 2:15 p.m. on the New York Mercantile Exchange, poised for the lowest settlement since April 22, 2013. Volume was 14 percent above the 100-day average. WTI traded at a $2.99 discount to Brent. Brent for November settlement declined 60 cents, or 0.7 percent, to $92.19 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded was about 27 percent above the 100-day average. Brent touched $91.25 yesterday, the lowest intraday level since June 2012.
Technical Indicator
Front-month Brent futures’ 14-day relative strength index was at about 25 today, data compiled by Bloomberg show. That’s a sixth day below 30, signaling the market is oversold and further losses probably can’t be sustained.
U.S. crude inventories may have climbed 0.6 percent to 358.6 million barrels in the week ended Oct. 3, the Bloomberg survey showed. Refineries reduced their utilization rate to 89.1 percent from 89.8 percent the previous week, the survey showed. Plants typically schedule maintenance in September and October when units move from maximizing gasoline output to producing winter fuels.
Refineries operated at 89.8 percent of capacity in the week ended Sept. 26, according to EIA. It’s the first time the rate fell below 90 percent since June.
“If we see a build in crude tomorrow and refinery runs down, the spread will widen further,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.
EIA Forecasts
WTI will average $94.58 a barrel in 2015 versus the September projection of $94.67, the EIA said today in its monthly Short-Term Energy Outlook. The agency trimmed its Brent crude forecast for next year to $101.67 from $103.
The Energy Department’s statistical arm forecast U.S. production of 8.54 million barrels a day this year, up from 7.45 million last year, and 9.5 million in 2015, the most since 1970. This year’s projection was revised up 10,000 from the September report, while the 2015 forecast was reduced 30,000.
The world economy will grow 3.8 percent next year, compared with a July forecast for 4 percent, after a 3.3 percent expansion this year, the Washington-based IMF said.
“The dire economic condition is really worsening,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market is worried about the global economy and that’s where the selling pressure is from. The EIA’s been saying that production is kind of outpacing demand.”
Biggest Decline
German industrial production, adjusted for seasonal swings, dropped 4 percent in August, the Economy Ministry in Berlin said today. That’s the biggest decline since January 2009 and compares with a median estimate of 1.5 percent in a Bloomberg News survey.
“The IMF report suggests more economic weakness, and more economic weakness means demand stays soft,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis.
Hedge funds cut bullish bets on Brent crude to the lowest level in three years. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 36,704 lots in the week to Sept. 30, ICE said today in its weekly Commitments of Traders report. That’s the lowest since Oct. 4, 2011. The data were delayed from yesterday because of an over-statement of open interest levels which the exchange is investigating, ICE said.
Wheat Jumps Most Since April on Global Supply Concerns
Wheat futures jumped the most since April on concern that adverse weather will hurt crops in South America and Australia. Soybeans and corn also gained.
About 20 percent of the maturing wheat crop may be at risk of damage from wet weather in the next 10 days in Argentina, and dry conditions in Australia will increase stress on 25 percent of plants as grain develops, Commodity Weather Group LLC in Bethesda, Maryland, said today in a report. Rain may delay the soybean and corn harvest and sowing of winter wheat from Louisiana to Ohio in the next 10 days, the forecaster said.
Weather “is raising the risks for smaller global wheat crops,” Greg Grow, the director of agribusiness at Archer Financial Services Inc. in Chicago, said in a telephone interview.
On the Chicago Board of Trade, wheat futures for December delivery rose 2.9 percent to $5.0575 a bushel at 12:01 p.m. A close at that price would mark the biggest gain for a most-active contract since April 15. The U.S. is the world’s top exporter. On Sept. 25, the price touched $4.6625, the lowest since June 30, 2010, with the U.S. Department of Agriculture forecasting that production will rise to a record.
Speculators unwound bets on a decline after the price yesterday closed above the 20-day moving average, Grow said.
Demand for immediate supplies soybeans and corn increased, Grow said. Through yesterday, the oilseed fell 27 percent in 2014 and corn dropped 21 percent on forecasts for record-high U.S. production. “Prices are rising to a level to get farmers to sell a few more bushels,” Grow said. “The price drop this year provides few incentives for farmers to sell their crops.”Soybean futures for November delivery gained 0.3 percent to $9.4525 a bushel. Yesterday, the price jumped 3.3 percent, the most since August 2013.
Corn futures for December delivery climbed 2 percent to $3.3925 a bushel. The price headed for the fifth straight gain, the longest rally since Aug. 15.
source: Bloomberg
U.S. crude inventories expanded by 2 million barrels in the week ended Oct. 3, a Bloomberg News survey showed before Energy Information Administration data tomorrow. The EIA cut its crude price forecasts today in a monthly report because of rising output and reduced demand. The International Monetary Fund cut its outlook for 2015 global growth. The Brent-WTI spread rose to near $3. “The spread is widening in anticipation of a build in inventories,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “Supply is adding pressure to WTI. We are in a downtrend here and it may accelerate.”
WTI for November delivery fell $1.20, or 1.3 percent, to $89.14 a barrel at 2:15 p.m. on the New York Mercantile Exchange, poised for the lowest settlement since April 22, 2013. Volume was 14 percent above the 100-day average. WTI traded at a $2.99 discount to Brent. Brent for November settlement declined 60 cents, or 0.7 percent, to $92.19 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded was about 27 percent above the 100-day average. Brent touched $91.25 yesterday, the lowest intraday level since June 2012.
Technical Indicator
Front-month Brent futures’ 14-day relative strength index was at about 25 today, data compiled by Bloomberg show. That’s a sixth day below 30, signaling the market is oversold and further losses probably can’t be sustained.
U.S. crude inventories may have climbed 0.6 percent to 358.6 million barrels in the week ended Oct. 3, the Bloomberg survey showed. Refineries reduced their utilization rate to 89.1 percent from 89.8 percent the previous week, the survey showed. Plants typically schedule maintenance in September and October when units move from maximizing gasoline output to producing winter fuels.
Refineries operated at 89.8 percent of capacity in the week ended Sept. 26, according to EIA. It’s the first time the rate fell below 90 percent since June.
“If we see a build in crude tomorrow and refinery runs down, the spread will widen further,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.
EIA Forecasts
WTI will average $94.58 a barrel in 2015 versus the September projection of $94.67, the EIA said today in its monthly Short-Term Energy Outlook. The agency trimmed its Brent crude forecast for next year to $101.67 from $103.
The Energy Department’s statistical arm forecast U.S. production of 8.54 million barrels a day this year, up from 7.45 million last year, and 9.5 million in 2015, the most since 1970. This year’s projection was revised up 10,000 from the September report, while the 2015 forecast was reduced 30,000.
The world economy will grow 3.8 percent next year, compared with a July forecast for 4 percent, after a 3.3 percent expansion this year, the Washington-based IMF said.
“The dire economic condition is really worsening,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market is worried about the global economy and that’s where the selling pressure is from. The EIA’s been saying that production is kind of outpacing demand.”
Biggest Decline
German industrial production, adjusted for seasonal swings, dropped 4 percent in August, the Economy Ministry in Berlin said today. That’s the biggest decline since January 2009 and compares with a median estimate of 1.5 percent in a Bloomberg News survey.
“The IMF report suggests more economic weakness, and more economic weakness means demand stays soft,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis.
Hedge funds cut bullish bets on Brent crude to the lowest level in three years. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 36,704 lots in the week to Sept. 30, ICE said today in its weekly Commitments of Traders report. That’s the lowest since Oct. 4, 2011. The data were delayed from yesterday because of an over-statement of open interest levels which the exchange is investigating, ICE said.
Wheat Jumps Most Since April on Global Supply Concerns
Wheat futures jumped the most since April on concern that adverse weather will hurt crops in South America and Australia. Soybeans and corn also gained.
About 20 percent of the maturing wheat crop may be at risk of damage from wet weather in the next 10 days in Argentina, and dry conditions in Australia will increase stress on 25 percent of plants as grain develops, Commodity Weather Group LLC in Bethesda, Maryland, said today in a report. Rain may delay the soybean and corn harvest and sowing of winter wheat from Louisiana to Ohio in the next 10 days, the forecaster said.
Weather “is raising the risks for smaller global wheat crops,” Greg Grow, the director of agribusiness at Archer Financial Services Inc. in Chicago, said in a telephone interview.
On the Chicago Board of Trade, wheat futures for December delivery rose 2.9 percent to $5.0575 a bushel at 12:01 p.m. A close at that price would mark the biggest gain for a most-active contract since April 15. The U.S. is the world’s top exporter. On Sept. 25, the price touched $4.6625, the lowest since June 30, 2010, with the U.S. Department of Agriculture forecasting that production will rise to a record.
Speculators unwound bets on a decline after the price yesterday closed above the 20-day moving average, Grow said.
Demand for immediate supplies soybeans and corn increased, Grow said. Through yesterday, the oilseed fell 27 percent in 2014 and corn dropped 21 percent on forecasts for record-high U.S. production. “Prices are rising to a level to get farmers to sell a few more bushels,” Grow said. “The price drop this year provides few incentives for farmers to sell their crops.”Soybean futures for November delivery gained 0.3 percent to $9.4525 a bushel. Yesterday, the price jumped 3.3 percent, the most since August 2013.
Corn futures for December delivery climbed 2 percent to $3.3925 a bushel. The price headed for the fifth straight gain, the longest rally since Aug. 15.
source: Bloomberg