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Brent Rises From 13-Month Low as Correction Overdone; WTI Gains

Aug. 13 (Bloomberg) -- Brent oil rose from a 13-month low on speculation prices decreased more than justified given supply threats and the ability to ship excess barrels. West Texas Intermediate advanced.

Futures climbed 1.2 percent in London after falling below $103 for a second day. Brent has slipped in the past month as Libyan and West African production has rebounded. Kurdish forces fought to retake positions overrun by Islamic State fighters in northern Iraq as Prime Minister Nouri al-Maliki tried to cling to power. The Energy Information Administration reported that U.S. crude supplies rose last week while fuel stockpiles fell.

“The Brent market is oversold,” Harry Tchilinguirian, the head of commodity markets strategy at BNP Paribas in London, said by phone. “The correction was overdone given that the surplus supplies in the Atlantic basin can be moved to Asia given how much prices have fallen. North Sea maintenance is reducing supply, putting a floor under Brent.”

Brent for September settlement rose $1.26 to close at $104.28 a barrel on the London-based ICE Futures Europe exchange. The contract touched $102.37, the lowest intraday level since July 1, 2013. The volume of all futures traded was 42 percent above the 100-day average at 3:10 p.m. in New York.

WTI for September delivery rose 22 cents to settle at $97.59 a barrel on the New York Mercantile Exchange. Volumes were 12 percent higher than the 100-day average. The U.S. benchmark crude traded at a $6.69 discount to Brent, up from $5.65 yesterday.

Gave Support

“The downward move is exhausted,” Jeff Clark, a San Francisco-based analyst at Stansberry & Associates, an investment advisory firm, said by phone. “WTI held at last week’s low today, which gave support from a technical prospective. Selling has dried up and prices could easily rise to $100.”

Libya loaded the first oil cargo from the port of Ras Lanuf since it was closed by rebels a year ago. A crude tanker left the harbor yesterday, Libya National Oil Co.’s spokesman, Mohamed Elharari, said. The vessel, carrying 680,000 barrels of oil, was bound for Italy, according to Ibrahim Al-Awami, the Oil Ministry’s director of measurement.

Kurdish peshmerga troops, bolstered by U.S. air strikes, fought Islamic militants near the town of Sinjar, Iraq, according to Nineveh provincial council member Hisham al- Brefkani. The push came as France said it would supply the Kurds with weapons and the U.S., which is also carrying out air surveillance missions, deployed scores of military advisers.

Air Strikes

President Barack Obama, who authorized limited air attacks against Islamic State after it made rapid gains last week, has tied expanded U.S. action to the formation of a more inclusive government capable of easing sectarian and ethnic divisions. The conflict has spared supply from Iraq’s south, home to more than three-quarters of its crude output.

“I see a lot of supply risk,” said Katherine Spector, a commodities strategist at CIBC World Markets Inc., said by phone. “There’s a potential for the other shoe to drop at any time. There’s no reason to be sanguine about the oil market.”

Brent slid yesterday after the International Energy Agency said demand growth eased last quarter, while crude production in the Organization of Petroleum Exporting Countries gained. OPEC crude output rose by 300,000 barrels a day to 30.44 million in July, a five-month high, the Paris-based agency said in its monthly oil market report.

Crude Stockpiles

WTI dropped as much as 0.6 percent after the EIA said U.S. crude stockpiles rose 1.4 million barrels to 367 million last week. It was the first crude supply gain in seven weeks. Inventories dropped 22.5 million barrels to 365.6 million in the previous six weeks, according to the agency, the Energy Department’s statistical arm.

“This shows that there’s plenty of crude,” Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at John Hancock in Boston, said by phone. “The increase in U.S. oil production has displaced imports, which is keeping the world well-supplied.”

U.S. refineries operated at 91.6 percent of their capacity last week, down 0.8 percentage point from Aug. 1, according to the EIA.

Stockpiles of distillate fuel, a category that includes diesel and heating oil, tumbled 2.42 million barrels to 122.5 million. It was the biggest decline since March. Distillate consumption rose 1.9 percent to 3.95 million, the highest since the week ended June 13.

Real Demand

Ultra low sulfur diesel for September delivery rose 5.69 cents, or 2 percent, to close at $2.9019 a gallon in New York. It was the biggest gain since June 12 and the highest settlement since July 29.

“Prices are up because supplies fell while demand picked up,” Carl Larry, president of Oil Outlooks & Opinions LLC in Houston, said by phone. “This was real demand not exports. Whether due to more manufacturing or crop planting the demand number is a sign of economic strength.”

Inventories of gasoline declined 1.16 million barrels to 212.7 million, the report showed. Demand for the fuel dropped 0.4 percent to 9.02 million barrels a day in the past four weeks, the report showed.

Gasoline for September delivery rose 1.99 cents, or 0.7 percent, to settle at $2.7544 a gallon on the Nymex. Pump prices dropped 0.1 cent to $3.473 a gallon nationwide yesterday, the lowest since March 4, according to AAA, the largest U.S. motoring group.

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