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WTI crude declines after US supply unexpectedly increases

West Texas Intermediate oil declined after a government report showed that U.S. crude inventories unexpectedly increased.

Crude stockpiles rose 1.4 million barrels to 367 million in the week ended Aug. 8, according to the Energy Information Administration. A 2.05 million-barrel supply drop was projected by analysts surveyed by Bloomberg. Output gained while refinery utilization dropped. 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 in OPEC’s second-biggest oil producing country.

“This shows that there’s plenty of crude,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at John Hancock in Boston. “The increase in U.S. oil production has displaced imports, which is keeping the world well-supplied. If not for the U.S. output gains we would have seen a spike because of all the geopolitical issues out there.”

WTI for September delivery fell 33 cents, or 0.3 percent, to $97.04 a barrel on the New York Mercantile Exchange.

Brent for September settlement gained 8 cents to $103.10 a barrel on the London-based ICE Futures Europe exchange. Volumes were 38 percent higher than the 100-day average. The contract touched $102.37, the lowest intraday level since July 1, 2013. The European benchmark crude traded at a $6.06 premium to WTI, up from $5.65 yesterday.

Crude supplies at Cushing, Okla., rose by 418,000 barrels to 18.4 million last week, data from the EIA, the Energy Department’s statistical arm, showed.

The EIA cut its 2014 price forecast for WTI after the U.S. reached its highest monthly output in 27 years in July. Futures will average $100.45 this year versus the July projection of $100.98, the Energy Department’s statistical arm said yesterday in its monthly Short-Term Energy Outlook. Oil output was 8.5 million barrels a day in July, the most since April 1987.

Inventories of gasoline declined 1.16 million barrels to 212.7 million, the report showed. Supplies were projected to fall by 1.5 million barrels, according to the median of 10 analyst estimates in the Bloomberg survey. Gasoline demand dropped 0.4 percent to 9.02 million barrels a day in the past four weeks, the report showed.

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.

Gasoline for September delivery dropped 1.77 cents, or 0.7 percent, to $2.7168 a gallon on the Nymex.

U.S. gasoline pump prices dropped 0.1 cent to $3.473 a gallon nationwide Tuesday, the lowest since March 4, according to AAA, the largest U.S. motoring group.

Brent slid yesterday after the International Energy Agency said demand growth eased last quarter, while crude production in the Organization of Petroleum Exporting Countries increased. OPEC crude output increased by 300,000 barrels a day to 30.44 million in July, a five-month high, amid gains from Saudi Arabia, the IEA said in its monthly oil market report.

Aggregate financing in China was 273.1 billion yuan ($44 billion) in July, the central bank said today in Beijing, contrasting with a Bloomberg LP gauge that showed China loosened monetary conditions last quarter at the fastest pace in almost two years. Factory production rose 9 percent from a year earlier in July, compared with 9.2 percent in June, figures from the statistics bureau showed.

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