Brent crude fell amid speculation that Ukraine’s election of a new president may help ease months of tension with Russia, the world’s biggest energy exporter. West Texas Intermediate slid in New York.
Futures dropped 22 cents in London. Ukraine elected billionaire Petro Poroshenko as president yesterday, handing him the task of stemming separatist unrest in the country, a conduit for Russian oil and natural gas supplies to Europe. China, the second-largest oil user globally, announced plans to slow its pace of energy consumption.
“There’s been quite a political vacuum in Ukraine, and that should begin to get resolved,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said by phone today. “News about Ukraine has been helping to bring down prices a bit,” he said, describing Poroshenko as “someone who can sit down with the Russians to try to work out their differences.”
Brent for July settlement ended the session at $110.32 a barrel on the London-based ICE Futures Europe exchange. Volume was 87 percent below the 100-day average at 1:24 p.m. New York time. Prices have lost 0.5 percent this year.
WTI for July delivery slid 17 cents to $104.18 a barrel in electronic trading before the 1 p.m. trading halt on the New York Mercantile Exchange. The floor was closed today for the U.S. Memorial Day holiday, and transactions will be booked tomorrow for settlement purposes. Trading is suspended from 1 p.m. to 6 p.m. New York time, according to exchange owner CME Group Inc.
The U.S. benchmark crude was at a discount of $6.14 to Brent. The spread closed at $6.19 on May 23, the narrowest in five weeks.
Hedge funds raised their net-long position in benchmark WTI futures by 4.1 percent in the week ended May 20, U.S. Commodity Futures Trading Commission data released May 23 show. Money managers raised net bullish bets on Brent crude for a second week, according to London-based ICE Futures Europe.
Ukrainians voted amid separatist violence that erupted after Russia annexed the Black Sea peninsula of Crimea in March. Ukraine says the turmoil is orchestrated by the government in Moscow, which denies the accusation.
“Market tensions are easing over potential disruptions from Russia,” Barnabas Gan, an economist at Oversea-Chinese Banking Corp. in Singapore, said by phone. “The market was also anticipating that U.S. and European sanctions could have been imposed on the Russian oil industry, which didn’t come to pass. The success of the election could have possibly eliminated these fears.”
Poroshenko received 53.8 percent of yesterday’s vote with 63.6 percent of ballots counted, according to Ukraine’s central electoral commission in Kiev. He’s set to gain the simple majority needed to avoid a runoff election. Yulia Tymoshenko, a former prime minister, was second of the 21 candidates. While most in Ukraine’s easternmost regions didn’t vote, Poroshenko’s success was welcomed in the U.S. and Europe.
“Our first step will focus on ending the war, chaos and disorder,” he told reporters, signaling he’ll call early parliamentary elections this year.
Russian President Vladimir Putin, who doesn’t recognize the government in Kiev, last week pledged to work with the winner of the election. The U.S and its allies have said they’d tighten sanctions against his nation if voting was disrupted.
Russia is the world’s second-largest net oil exporter and supplied 30 percent of Europe’s natural gas last year, data from the U.S. Energy Information Administration show.
In China, the State Council plans to cut energy consumption per unit of gross domestic product by 3.9 percent through 2015, according to a notice posted on the central government’s website. The nation, which trails only the U.S. in oil demand, will accelerate development of low-energy use and low-emission industries, it said.
“China is trying to reduce energy-consumption targets, and that news might be considered as a negative factor for the oil market,” said Ken Hasegawa, an energy trading manager at Newedge Group in Tokyo.
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