By Ben Sharples - Jul 22, 2013 9:20 AM GMT+0400
“We’ve shown signs in the past week of developing an investor consensus and that’s put us into a trading range.” Ric Spooner, a chief market analyst at CMC Markets in Sydney, said of concern that the Federal Reserve may reduce stimulus measures that have fueled the U.S. economic recovery. “You’d need some pretty compelling news” for WTI to rise above $110 to $115 a barrel, he said.
West Texas Intermediate crude rose for a fourth day, narrowing its discount to London-traded Brent futures. Hedge funds increased bullish bets on the U.S. benchmark grade as stockpiles shrank.
Futures climbed as much as 0.4 percent in New York after capping a fourth weekly advance. WTI surpassed Brent by as much as 3 cents in intraday trading on July 19 as pipeline and rail shipments helped clear a U.S. supply bottleneck. Crude supplies have dropped by 27.1 million barrels in the three weeks ended July 12, according to the Energy Information Administration. The price rally may stall as a technical indicator shows the market is overbought for the longest period in more than 11 years.
WTI for August delivery, which expires today, rose as much as 44 cents to $108.49 a barrel in electronic trading on the New York Mercantile Exchange and was at $108.42 at 12:51 p.m. Singapore time. The volume of all futures traded was about 20 percent below the 100-day average. The contract settled at $108.05 on July 19, the highest close since March 2012. The more actively traded September future was up 40 cents at $108.27.
Brent-WTI Spread
Brent for September settlement gained as much as 44 cents, or 0.4 percent, to $108.51 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade was at a premium of 11 cents to WTI contracts, compared with 20 cents on July 19.
Brent’s premium to WTI has declined as improved pipeline networks and the use of rail links eased the North American supply glut created by rising production of crude from shale formations. The gap was as much as $23.44 a barrel in February. The U.S. bellwether grade has advanced 18 percent this year, while Brent has slid 2.6 percent as North Sea output stabilized after field maintenance.
Money managers increased net-long positions on WTI, or wagers that prices will climb, by 8 percent to 304,383 futures and options combined in the seven days ended July 16, the U.S. Commodity Futures Trading Commission said in its weekly report on July 19. That’s the highest level since April 2011.
WTI’s 14-day relative strength index is above 70 for a 12th day today, according to data compiled by Bloomberg. That’s the longest stretch since March 2002. A reading above that level typically means gains have been excessive and may no longer be sustainable.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net