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WTI Trims Monthly Gain on U.S. Demand, Discount to Brent Narrows

Feb. 28 (Bloomberg) -- West Texas Intermediate crude fell for a second day, trimming a monthly advance amid speculation demand may slow in the U.S., the world’s biggest oil consumer, as refineries enter the spring maintenance season.

Futures decreased as much as 0.5 percent in New York and were set for the first weekly drop in one-and-a-half months. A measure of U.S. fuel use slid to the lowest level since June, data from the Energy Information Administration show. OPEC’s production declined to the least in more than two years as Saudi Arabia curbed output and Libya’s supply was disrupted, according to a Bloomberg News survey.

“Supply is still ample, winter demand is coming off, and refineries will enter maintenance season,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said by e-mail. “Oil prices should continue trading marginally lower today and the days ahead.”

WTI for April delivery fell as much as 53 cents to $101.87 a barrel in electronic trading on the New York Mercantile Exchange and was at $102.29 as of 11:08 a.m. London time. The contract lost 19 cents to $102.40 yesterday. The volume of all futures traded was about 50 percent below the 100-day average. Prices are up 4.9 percent this month.

Brent for April settlement decreased 33 cents to $108.63 a barrel on the London-based ICE Futures Europe exchange. The European crude was at a $6.36 premium to WTI on ICE. The spread closed at $6.56 yesterday, the narrowest since Oct. 4.

Cushing Supplies

WTI’s discount to Brent has narrowed from $8.91 a barrel at the end of January as winter storms bolstered U.S. demand for heating fuels and crude inventories at Cushing, Oklahoma, shrank with the opening of a new pipeline.

Stockpiles at Cushing, the delivery point for WTI contracts, dropped by 1.08 million barrels to 34.8 million last week, the lowest level since October, the EIA reported on Feb. 26. TransCanada Corp. began moving crude in January to the Texas Gulf Coast from the hub via the southern portion of its Keystone XL pipeline.

Total U.S. product demand averaged 18.7 million barrels a day in the four weeks ended Feb. 21, according to the EIA, the Energy Department’s statistical arm. This measure of fuel consumption slid 2.3 percent and was down for the third period.

“The demand situation is weak,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin in Sydney. “Oil has been up at these levels because of weather events. The draws that we have been seeing have been seasonal.”

OPEC Decline

Output from the Organization of Petroleum Exporting Countries dropped by 11,000 barrels a day to an average 29.877 million this month, compared with 29.888 million in January, according to the Bloomberg survey of oil companies, producers and analysts. That’s the lowest rate since June 2011. The 12- member group pumps about 40 percent of the world’s crude.

Brent has technical support along its 100-day moving average, at about $108.75 a barrel today, data compiled by Bloomberg show. Buy orders tend to be clustered around chart- support levels.

In Ukraine’s Crimea, unidentified gunmen occupied the region’s main airport as the country’s acting president Oleksandr Turchynov said Russian troops are “directly involved” in the conflict. Deposed former President Viktor Yanukovych will hold a press conference today in Russia, where he has been granted safe haven. The Kremlin has condemned the uprising, saying protesters put the country on a course of “dictatorial, terrorist methods.”

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