Now, instead of a squeeze on supplies, traders are betting on a near-term surplus of inventories, at least until ramped-down refineries begin to rev up operations again. Delayed US government data for the week to October 11 confirmed the first decline in Cushing stocks in 14 weeks, while industry data suggested the drawdown had continued since then. "That crude build stood out," said Gene McGillian, analyst with Tradition Energy in Stamford, Connecticut. "After last week's API data there are signs that we have strong production levels and ample supplies."
The December premium for Brent crude to US futures, the Brent/WTI spread, ballooned out by $1.30 to more than $10 a barrel to the widest since April. The December WTI contract also fell to a discount versus January, a structure known as contango, signalling a near-term excess of oil.
US oil futures for November delivery, which expire at the end of trade on Tuesday, fell $1.59 per barrel to settle at $99.22 a barrel. Brent crude futures for December delivery fell just 30 cents to close at $109.64 a barrel. US oil for December delivery fell $1.43 to settle at $99.68 a barrel. The December-January spread dropped 25 cents to end at -13 cents, flipping the second-month spread into contango for the first time since June.
Data from the US Energy Information Administration for the week to October 11, which was delayed until Monday by the government shutdown, showed a 4 million barrel build in domestic stockpiles for the week. It also showed Cushing stocks rose by 366,000 barrels after 14 weeks of decline. Traders said Genscape on early Monday reported inventories at Cushing declined slightly between Tuesday and Friday last week, by 135,000 barrels.
Many analysts were already anticipating the end of the restocking phase, which they believed would be short-lived as refineries and pipelines return from maintenance. "Over the course of the next few weeks you expect to see Cushing draw again," said Amrita Sen, a chief analyst at consultant Energy Aspects.
Losses in both oil contracts were limited by belief that the US Federal Reserve might delay curbing its monetary stimulus program until next year, which is largely seen as supporting oil demand. Brent oil found support from lower global supply. Libyan output has fallen sharply and Nigerian output has been repeatedly hit by theft. Investors face a deluge of data this week as US government agencies catch up after a 16-day shutdown. The US Labour Department will release its closely watched nonfarm payrolls data for September at 8:30 am EDT (1230 GMT) on Tuesday.