WTI trading volume rises as Egyptian crisis escalates

West Texas Intermediate oil climbed near $100 a barrel on concern that protests in Egypt will threaten supplies and speculation that U.S. stockpiles shrank last week (26). Trading volume was the most in 16 months. Crude rose to a 14-month high as the political showdown escalated in Egypt, which controls the Suez Canal, a key transit point for oil tankers. In fact, Egypt controls the canal and the Suez-Mediterranean Pipeline, through which a combined 2.24 million barrels a day moved to markets in Europe and North America in 2011, according to the Energy Information Administration. Hundreds of thousands massed to demand the departure of President Mohamed Mursi. Inventories may have dropped to the lowest level since May 31, according to a Bloomberg survey. Brent’s premium over WTI narrowed to the least in almost 30 months. WTI is acting as a proxy for the concerns regarding the vessel traffic to the Suez. WTI for August delivery gained $1.61, or 1.6 percent, to $99.60 a barrel on the New York Mercantile Exchange, the highest settlement since May 3, 2012. Yesterday the volume of all futures traded was 85 percent above the 100-day average at 3:22 p.m. and the futures have advanced 8.5 percent this year. Brent for August delivery rose $1, or 1 percent, to settle at $104 a barrel on the London-based ICE Future Europe exchange. Volume was 4.6 percent below the 100-day average. The European benchmark’s premium to WTI narrowed to $4.40 a barrel, the smallest gap since Jan. 4, 2011.

WTI was little changed after the American Petroleum Institute reported that U.S. crude inventories dropped 9.36 million barrels to 382.6 million in week 26. The August contract rose 1.6 percent to $99.55 a barrel at 4:34 p.m. It traded at $99.47 before the report was released at 4:30 p.m. In Egypt, Mursi’s islamist supporters vowed to stand firm against what they saw as a threat of a military coup. The armed forces pledged yesterday to impose their own plan if Mursi didn’t Egypt’s political crisis within 48 hours. The U.S. embassy in Cairo is closed today and the embassy warns U.S. citizens to avoid areas where demonstrations may occur.
U.S. crude stockpiles fell 2.25 million barrels, or 0.6 percent, to 391.9 million in the week ended June 28, the Bloomberg survey showed. Refineries probably increased operating rates to the highest level in more than 10 months as motor fuel production climbed before the U.S. independence Day holyday on July 4.

The U.S. accounted for 21 percent of global oil demand in 2012, according to the International Energy Agency’s monthly oil market report published on June 12. “We are looking at a decline in inventories,” said Gordy Elliott, a risk-management specialist at Intl FC Stone LLC in St. Louis Park, Minnesota. “Brent is having more challenges to find a reason to rally. You’ll probably see WTI trading even at a premium to Brent.” The drop in the gap between Brent, a gauge for more than half the world’s oil, and WTI shows how improved pipeline networks and the use of rail links have helped to unlock a glut at America’s oil-storage hub at Cushing, Oklahoma, the delivery point for WTI futures.

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