West Texas Intermediate crude rose to the highest level in four months on speculation that inventories in Cushing, Okla., decreased last week and as cold weather boosted fuel demand.
Prices climbed as much as 1.3 percent. Supplies at Cushing, the delivery point for WTI futures, probably dropped for a third week, according to analysts surveyed by Bloomberg.
A second storm in three days has brought more snow to the U.S. Northeast and mid-Atlantic, bolstering the use of distillate fuels, including heating oil and diesel.
“We are likely to see another draw in Cushing,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “That’s what the markets are telling us. With this weather, distillate inventories are also going to be a major focus.”
WTI for March delivery increased $1.04, or 1 percent, to $101.34 a barrel at 10:39 a.m. on the New York Mercantile Exchange. Prices touched $101.62 a barrel, the highest level since Oct. 18. They have rallied 3.9 percent this month.
The volume of all futures traded was 35 percent above the 100-day average. Floor trading was closed Monday for the U.S. Presidents Day holiday.
Brent for April settlement rose 41 cents, or 0.4 percent, to $109.59 a barrel on the London-based ICE Futures Europe exchange. Volume was 44 percent below the 100-day average.
The European benchmark grade was at a premium of $8.52 to WTI for the same month. The spread was $8.95 on Feb. 14, the widest in a week based on closing prices.
“The bulls can take it to around $105 before running into resistance,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Conn. “The bulls are in control of the market. A lot of the strength we’re seeing is predicated on the narrowing of the WTI-Brent spread.”
Cushing stockpiles dropped 4.23 million barrels in the two weeks ended Feb. 8, as the southern leg of TransCanada Corp.’s (NYSE: TRP) Keystone XL pipeline moved oil to the Gulf Coast of Texas from the hub.
Supplies at the hub probably tumbled 1 million to 1.5 million barrels last week, Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Ill.-based consulting company, said in a note to clients. Phil Flynn, senior market analyst at Price Futures Group in Chicago, forecast a 1 million- barrel decrease.
The Energy Information Administration is scheduled to release its weekly inventory data on Feb. 20, a day later than usual because of Presidents Day.
The portion of the Keystone XL link initially began moving 288,000 barrels a day of crude. It will ramp up over the course of the year toward capacity of 700,000-barrel capacity, executives said in a Jan. 22 press conference at the company’s headquarters in Calgary.
“Cushing stocks appear poised for another moderate decrease,” Ritterbusch said in a note to clients. The drop is the “result of last month’s activation of the southern Keystone Gulf leg.”
About 25 percent of households in the Northeast use heating oil to warm their homes, according to the EIA, the Energy Department’s statistical arm.
The latest round of snow follows a storm that dropped about 3 inches in New York on Saturday, bringing the city’s total winter accumulation to 55.6 inches, more than triple the average through mid-February, according to Tom Kines, a meteorologist for AccuWeather.com in State College, Pa.
“The winter storms are keeping the market well supported,” Flynn said. “Heating oil supplies are very tight.”
Distillate inventories dropped for a fifth time in the week ended Feb. 7 to 113.1 million barrels, according to the EIA, the lowest level since Nov. 22.
March futures for ultra low sulfur diesel, a proxy for heating oil, gained as much as 1.4 percent to $3.12 a gallon Tuesday on the Nymex.