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WTI Oil Falls First Time in Five Days on Emerging-Market Outlook

Jan. 24 (Bloomberg) -- West Texas Intermediate crude decreased for the first time in five days as equities declined on concern that growth in emerging economies will slow, reducing fuel consumption.

Futures fell as much as 0.8 percent. U.S. stocks dropped a fourth day as the MSCI Emerging Markets Index slid 1.5 percent, extending its loss for the year to 5.3 percent. Currencies from developing countries have tumbled, according to Bloomberg data, as signs of weakness in China’s economy added to speculation that stimulus curbs by the U.S. Federal Reserve will cut demand.

“Concerns about the emerging-market outlook are weighing on sentiment for demand going forward,” said John Kilduff, partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The situation is very volatile and we are seeing it impact all the market.”

WTI for March delivery dropped 60 cents, or 0.6 percent, to $96.72 a barrel at 11:49 a.m. on the New York Mercantile Exchange. It settled at $97.32 yesterday, the highest close this year. The volume of all contracts traded was little changed from the 100-day average. Prices are up 2.5 percent this week.

Brent for March settlement slid 27 cents, or 0.3 percent, to $107.31 a barrel on the ICE exchange. Volume was little changed from the 100-day average. The grade has advanced 0.8 percent this week.

The spread between WTI and Brent widened to $10.59 a barrel from $10.26 yesterday. Earlier today, it shrank to $9.49, the least since Nov. 8, on the opening of a pipeline linking the central U.S. to the Gulf Coast. The gap has narrowed from $19.38 on Nov. 27.

Emerging Markets

Benchmark equity gauges from Poland to South Africa and Brazil slid at least 1.2 percent, while the Argentine peso drove losses in 21 of 24 developing-nation currencies. Ukraine’s bond yields jumped to the highest level since before the nation secured a bailout last month from Russia as the European Union warned anti-government protests could escalate into a civil war.

More than $940 billion has been erased from the value of emerging-market equities since the Fed signaled in May that it could start scaling back bond purchases that boosted demand for higher-yielding assets. A Bloomberg gauge tracking 20 emerging- market currencies fell to the lowest level since April 2009 today, tumbling 9.9 percent over the past 12 months, bigger than any annual decline since it slid 15 percent in 2008.

The Standard & Poor’s 500 Index dropped 1.3 percent and the Dow Jones Industrial Average slipped 1.1 percent.

Keystone XL

The southern leg of TransCanada Corp.’s Keystone XL pipeline is initially transporting 288,000 barrels of light, sweet crude a day from Cushing, Oklahoma, the delivery point for WTI traded in New York, to Nederland, Texas. Flows will increase over the course of the year toward its 700,000-barrel capacity and carry more heavy crude from Canadian oil sands formations, executives said at a press conference in Calgary on Jan. 22.

The proposed northern portion of Keystone XL, which would stretch from Alberta’s oil sands to Nebraska, is being held up because it requires a presidential permit. TransCanada split its original project after President Barack Obama rejected a prior route in 2012 because of fears its path through Nebraska would threaten ecologically sensitive lands.

U.S. inventories of distillate fuel, a category that includes heating oil and diesel, declined by 3.21 million barrels last week, the Energy Information Administration said in a report yesterday. Crude inventories expanded by 990,000 barrels to 351.2 million, ending a seven-week run of decreases, according to the EIA, the Energy Department’s statistical arm.

Refinery Utilization

Refineries operated at 86.5 percent of capacity, down 3.5 percentage points from the prior week, yesterday’s report showed. Refinery utilization rates have dropped in the month of January in nine of the last 10 years, according to EIA data. Units are idled at the start of the year after preparing for the winter heating season in November and December.

“We have the introduction of all this light, sweet oil taking place as refineries go into turnarounds,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “The oil can’t be exported, so inventories should build along the Gulf, which will put renewed downward pressure on WTI.”

Industry advocates such as Senator Lisa Murkowski of Alaska are calling for an end to 39-year-old restrictions on U.S. crude exports. Murkowski, the top Republican on the Senate Energy Committee, called on President Barack Obama on Jan. 7 to end the limitations and vowed to introduce legislation if he doesn’t.

Winter Weather

Frigid temperatures and snowstorms have struck from the Midwest to the East Coast for the second time this month, crimping operations at refineries and bolstering demand for heating fuels.

Ultra low sulfur diesel rose 3.19 cents, or 1 percent, to $3.1084 a gallon in New York. Futures touched $3.1088, the highest level since Dec. 30, in intraday trading. Volume was 25 percent higher than the 100-day average.

WTI may decline next week amid speculation that U.S. crude supplies will increase, a separate Bloomberg survey showed. Seventeen of 36 analysts and traders, or 47 percent, forecast crude will fall through Jan. 31. Eleven respondents projected a gain and eight said prices will be little changed.

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