West Texas Intermediate crude fell for the first time in three days as the dollar strengthened and U.S. stockpiles grew for a ninth week. Brent advanced after President Barack Obama announced sanctions aimed at Russia.
WTI declined 0.9 percent. The dollar rose for a second day against the euro after the Federal Reserve signaled yesterday it will probably raise interest rates by the middle of next year. Crude supplies climbed 25.6 million barrels in the nine weeks ended March 14. Brent rebounded and WTI pared losses after the announcement of the sanctions targeting Russian billionaire Gennady Timchenko, founder of Gunvor Group Ltd. The U.S. also named Russia President Vladimir Putin as a Gunvor investor. Gunvor said Putin has never had ownership.
“The dollar is following the Fed statement and oil finally is seeing some selling pressure,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market is refocusing on the fact that we have more than ample supplies.”
WTI futures for April delivery slipped 94 cents to settle at $99.43 a barrel on the New York Mercantile Exchange. The contract expired today. The more-active May contract fell 27 cents to $98.90. Trading was 13 percent above the 100-day average for the time of day at 2:36 p.m.
Brent for May settlement gained 60 cents, or 0.6 percent, to $106.45 a barrel on ICE Futures Europe in London. The European benchmark’s premium to WTI widened to $7.55.
Brent rose on concern that U.S. and European sanctions against Russia may disrupt energy supplies.
Obama said the U.S. is imposing financial sanctions on a wider swath of Russian officials and a Russian bank as he authorized further penalties that would directly target sectors of the Russian economy.
Gunvor is one of the world’s largest commodity traders with 2012 revenue of $93 billion. It’s controlled by billionaires Torbjorn Tornqvist and Timchenko. The Treasury Department said Timchenko’s activities in the energy sector have been linked directly to Putin.
Gunvor said in an e-mailed statement that Timchenko has sold his entire stake in the firm to Tornqvist, who now holds 87 percent of the company, with senior managers controlling the rest.
“The possibility that you may see a temporary supply disruption is causing European prices to rise a little bit,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The market is reacting positively to the Gunvor news.”
Putin signed an accord on March 19 to absorb Crimea, the southern Ukraine region, showing no sign of backing down from the worst confrontation with the West since the Cold War.
WTI slipped as the dollar rose as much as 0.6 percent to $1.3749 per euro as the Fed further tightened its bond-buying. A stronger dollar reduces crude’s investment appeal.
The Fed cut the monthly purchases by $10 billion to $55 billion at the end of a two-day meeting and said it will slow purchases in “further measured steps.” Fed Chair Janet Yellen said borrowing costs could start rising “around six months” after the Fed stopped buying bonds.
“The dollar is strengthening on the back of hawkish comments from Yellen,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Dollar strength is bearish for the market and it’s continuing today.”
U.S. crude inventories climbed by 5.85 million barrels to 375.9 million, the highest level since Nov. 29, the Energy Information Administration said yesterday.
Domestic production rose 33,000 barrels a day to 8.22 million, the most since 1988. Output has surged on a combination of horizontal drilling and hydraulic fracturing, or fracking, which has unlocked supplies in shale formations.
Electronic trading volume on the Nymex was 493,054 contracts at 4:23 p.m. It totaled 666,208 contracts yesterday, 28 percent above the three-month average. Open interest was 1.62 million contracts, the least since Feb. 7.