Feb. 6 (Bloomberg) -- Oil dropped to a two-week low in New York as U.S. inventories climbed last week, helping send the discount to Brent crude to the steepest level this year.
West Texas Intermediate futures fell as much as 1.7 percent on Energy Information Administration data showing that supplies rose 2.62 million barrels to 371.7 million. WTI’s discount to London-traded Brent widened for a sixth day after limits on the Seaway pipeline reduced flows to the Gulf Coast. Oil output rose a second week and refinery operations dropped, the EIA said.
“U.S. inventories are extremely robust,” said Adam Wise, who helps manage a $6 billion oil and gas bond portfolio as a managing director at Manulife Asset Management in Boston. “The spread between WTI and Brent should continue to widen until we get additional pipeline capacity later this year.”
Crude oil for March delivery fell 20 cents to $96.44 a barrel at 11:31 a.m. on the New York Mercantile Exchange. The contract traded at $95.68 before the release of the report at 10:30 a.m. in Washington. Trading was 84 percent above the 100- day average for this time of day. Futures are up 5 percent this year.
Brent oil for March settlement gained 9 cents to $116.61 a barrel on the London-based ICE Futures Europe exchange. Brent volume was 36 percent above the 100-day average.
The European benchmark grade traded at as much as a $20.87- a-barrel premium to WTI, the widest spread on an intraday basis since Dec. 21. The gap has grown since Enterprise Products Partners LP said Jan. 31 that capacity on the Seaway pipeline to the Gulf Coast from Cushing, Oklahoma, will be limited until late 2013.
The crude supply gain left stockpiles at the highest level since the week ended Dec. 7, the report showed. Crude production advanced 4,000 barrels a day to 7 million in the week ended Feb. 1, the EIA, the Energy Department’s statistical arm, said today.
Refineries operated at 84.2 percent of capacity in the seven days ended Feb. 1, down 0.8 percentage point from the prior week. Refiners often idle units for maintenance at this time of year as demand shifts away from heating oil and before gasoline use rises.
Increasing output in the U.S. and Canada and the lack of pipeline capacity has bolstered stockpiles at Cushing to a record in January. Stockpiles at the hub slipped 315,000 barrels to 51.4 million last week, the report showed.
The U.S. will tighten sanctions on Iran today with measures blocking the exporter from repatriating oil payments in dollars, euros and other hard currencies. The new restrictions are aimed at stopping that country’s nuclear program.
Crude buyers such as China, Japan and India must use their own currencies to pay Iran and keep the payments in escrow accounts, or else risk expulsion from the U.S. banking system. Iran will be able to use the funds only for locally sourced goods and services, in what will amount to barter arrangements.
WTI’s rebound in New York stalled yesterday along the bottom of an uptrend channel that was breached the previous day, signaling technical resistance, where sell orders may be clustered. This indicator is around $97.50 a barrel today, according to data compiled by Bloomberg.