Thursday, March 27, 2014

WTI oil on the rise

By Mark Shenk

West Texas Intermediate crude (NYMEX:CLJ14) advanced to a two-week high after supplies at Cushing, Ok., the delivery point for the contract, dropped for an eighth week. Brent gained in London.

WTI rose as much as 1.3 percent. Cushing supplies fell 1.33 million barrels to 28.5 million last week, the lowest level in more than two years, the Energy Information Administration said yesterday. President Barack Obama said yesterday that the crisis in Ukraine may escalate, warning that sanctions on Russia may include the energy sector.

“We’re still dealing with the Cushing hangover today,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “Supplies have fallen eight weeks now and are at the lowest level since January 2012. The Ukraine crisis continues to fester in the background, which is giving the market added support.”

WTI for May delivery gained $1.20, or 1.2 percent, to $101.46 a barrel at 10:19 a.m. on the New York Mercantile Exchange. Futures touched $101.61, the highest intraday price since March 10. The volume of all futures traded was 20 percent above the 100-day average.

Brent for May settlement increased 62 cents, or 0.6 percent, to $107.65 a barrel on the London-based ICE futures Europe exchange. Trading volume was 8 percent lower than the 100-day average. The European benchmark grade traded at a $6.19 premium to WTI.

Cushing supplies started falling in January after the southern link of TransCanada Corp.’s Keystone XL pipeline to the Texas Gulf Coast opened, easing a bottleneck from the hub.

‘Quite Tight’

“It seems to me that WTI is reacting to Cushing,” said Julius Walker, global energy markets strategist at UBS Securities LLC in New York. “Cushing stocks drew yesterday. They are getting quite tight and are now below the five-year average and at the bottom of the range.”

Crude inventories along the Gulf of Mexico, known as PADD 3, rose 6.06 million barrels to 200.3 million, the most since EIA data began in 1990 and the 10th weekly gain. The pipelines from Cushing to Houston move oil to PADD 3 from PADD 2, which includes Oklahoma.

Total U.S. crude inventories expanded by 6.62 million barrels to 382.5 million in the week ended March 21, according to the EIA, the Energy Department’s statistical unit.

“It looks like the former glut at Cushing has simply moved to the Gulf Coast,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Total supplies remain ample and I think that the fundamentals will reassert themselves and we’ll be looking at sub-$95 WTI in the second quarter.”

Running Roughshod

Obama said yesterday after a meeting with European leaders that there were consequences for being complacent over the annexation of Crimea from Ukraine and warned that Russia can’t run “roughshod” over its neighbors.

The U.S. has imposed asset freezes and visa bans on 31 Russians, Ukrainians and Crimeans, including political and business figures close to Putin. The 28-nation European Union has put 51 people on its blacklist, including some on the U.S. roster, while stopping short of punishing businesspeople.

The Group of Seven -- which includes the U.S., the U.K., Germany, France, Italy, Canada and Japan -- threatened further sanctions on the world’s biggest energy-0exporting country after a March 24 meeting.

WTI also rose on positive U.S. economic data. Applications for unemployment benefits decreased by 10,000 to 311,000 in the period ended March 22, Labor Department data showed today in Washington. The median forecast of 49 economists surveyed by Bloomberg called for 323,000 claims.

Separate figures from the Commerce Department showed the U.S. economy expanded more than previously estimated in the final three months of 2013. Gross domestic product climbed at a 2.6 percent annualized rate in the fourth quarter, revised from 2.4 percent, reflecting in part more spending on health care.

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