Oil advanced in New York amid concern that escalating tensions between Syria and Turkey may disrupt supplies from the Middle East. Brent's premium to West Texas Intermediate crude widened to the most in almost a year.
Futures rose as much as 1.2 percent after Turkey seized cargo on a Syrian passenger plane and on unconfirmed reports of the discovery of weapons parts and military communications gear. The Middle East accounts for about 33 percent of world oil supplies, according to BP Plc. The American Petroleum Institute said yesterday that U.S. crude inventories rose 1.6 million barrels last week, and the Energy Department is forecast to report a 1.5 million barrel gain for the period today.
"The unrest between Syria and Turkey is a lit powder keg," said Michael Poulsen, an analyst at Global Risk Management in Middelfart, Denmark, who predicts Brent crude may advance to $120 a barrel this month. "The general supply-demand situation is balanced, walking a tightrope between weaker growth projections and the risk of supply disruptions."
WTI for November delivery increased as much as $1.06 to $92.31 a barrel in electronic trading on the New York Mercantile Exchange and was up 86 cents at $92.11 as of 1:06 p.m. London time. The contract fell 1.2 percent yesterday to $91.25, the lowest close since Oct. 8. Prices are down 7 percent this year.
Brent for November settlement on the London-based ICE Futures Europe exchange advanced 78 cents to $115.11 a barrel. The European benchmark crude was at a $22.95 premium to WTI. The spread was $23.08 yesterday, the widest closing level since Oct. 21, 2011.
The October gasoil contract on the ICE exchange expires today. It traded at $1,027 a metric ton at 11:38 a.m. in London.
About 1.2 million barrels of crude a day is shipped from the Turkish port of Ceyhan, according to consultants Petromatrix GmbH in Zug, Switzerland. Ceyhan is the export location for most of the oil pumped in northern Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, and for supplies from Azerbaijan.
Crude inventories at Cushing, Oklahoma, the delivery point for the WTI futures, increased 297,000 barrels last week to 44.1 million, the API data showed.
"The market is factoring in an inventory build and a little bit more demand destruction," said Jonathan Barratt, chief executive officer of Barratt's Bulletin, a commodity newsletter in Sydney.
U.S. gasoline consumption will average 8.72 million barrels a day this year, down from 8.75 million in 2011 and a projection last month of 8.73 million, the DOE's Energy Information Administration said yesterday in its monthly Short-Term Energy Outlook. WTI will average $95.55 a barrel this year, down from its September forecast of $95.66, the report showed.
Gasoline for November delivery in New York was little changed after closing at $2.9593 yesterday, the highest this month.
Stockpiles of the motor fuel increased 2.5 million barrels last week, the API said. The DOE report today will show a gain of 250,000 barrels, according to the median estimate of 11 analysts surveyed. Distillate supplies, a category that includes heating oil and diesel, decreased 6.2 million barrels, the API report showed. A 1 million-barrel drop is projected in the government data.
Gasoline at the pump in California declined from a record as refiners began making a different blend of fuel after receiving permission from the state. The average price slid to $4.666 a gallon yesterday from an all-time high of $4.671 on Oct. 9, according to AAA, the nation's largest motoring organization. Wholesale California-blend in Los Angeles slid 22.5 cents to 34 cents a gallon above New York futures after the California Energy Commission said inventories in the state climbed 4.9 percent last week.
Prices had surged after a power failure at Exxon Mobil Corp.'s 150,000 barrel-a-day refinery in Torrance near Los Angeles, a fire at Chevron Corp. (CVX)'s plant in Richmond close to San Francisco, and the closing of a Chevron pipeline that delivers crude to northern California. The California Air Resources Board granted refineries permission on Oct. 7 to make gasoline with a higher vapor pressure, allowing them to produce more of the fuel by adding butane to the mix.