Brent Set for Fourth Weekly Loss Amid Russia Clash; WTI RisesGrant Smith
Brent crude headed for a fourth weekly decline amid speculation that heightened sanctions against Russia for its annexation of Ukraine’s Crimean peninsula will have little impact on oil supplies.
Brent, up 0.6 percent today, has lost 1.4 percent since March 14 in the longest run of weekly losses since November. It advanced yesterday as the U.S. announced more sanctions on Russia after it seized control of Crimea. The measures target aides and associates of President Vladimir Putin, including billionaire Gennady Timchenko, co-founder of energy-trading company Gunvor Group Ltd.
“The Ukraine risk premium has been almost fully erased over the past week as players turn their attention to softening fundamentals,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in a report. “We doubt individual bans and asset freezes will escalate to wider energy sanctions.”
Brent for May settlement rose 62 cents to $107.07 a barrel on the London-based ICE Futures Europe exchange as of 12:41 p.m. local time. The European benchmark was at a $7.81 premium to West Texas Intermediate on ICE. The gap widened for the first time in four days to close yesterday at $7.55.
WTI for May delivery rose 38 cents to $99.28 a barrel in electronic trading on the New York Mercantile Exchange. The April contract expired yesterday after dropping 0.9 percent to $99.43. The volume of all futures traded was about 36 percent below the 100-day average for the time of day. Front-month prices increased 0.4 percent this week.
WTI may decline next week on concern that U.S. crude stockpiles will rise, according to a Bloomberg News survey. Eighteen of 39 analysts and traders surveyed, or 46 percent, predict prices will drop through March 28.
U.S. crude stockpiles climbed by 5.85 million barrels to 375.9 million, the highest level since Nov. 29, according to data from the EIA, the Energy Department’s statistical arm, on March 19. Production increased to 8.215 million barrels a day, the highest rate in almost 26 years.
Supplies of distillate fuel, a category that includes heating oil and diesel, fell 3.1 million barrels last week to 110.8 million, the least since May 2008. Gasoline stockpiles dropped 1.47 million barrels to 222.3 million.
The U.S. Treasury Department yesterday imposed sanctions on Timchenko and alleged Putin has a direct financial interest in Gunvor. The company said that Putin has never had any ownership and Timchenko had already sold his entire stake to his partner, Torbjorn Tornqvist.
The broader sanctions marked an escalation of efforts to punish Putin and his associates for Russian intervention in Ukraine’s Crimean region. Timchenko was one of 20 people added to a list of individuals banned from entering the U.S., with any assets in the country frozen and a bar on doing business with U.S. companies.
“The oil market seems largely to have arrived at the conclusion that Crimea is now Russian, there’s not much anyone can do about it,” said Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark. “There will likely be other topics that will make oil move a whole lot more, but sanctions on Russian individuals and companies is not one of them.”
The Organization of Petroleum Exporting Countries will cut crude exports to the lowest level in two months as refiners around the world conduct seasonal maintenance, according to tanker-tracker Oil Movements.
OPEC, responsible for 40 percent of global oil supplies, will reduce shipments by 620,000 barrels a day, or 2.5 percent, to 23.74 million a day in the four weeks to April 5, the researcher said in an e-mailed note yesterday. That’s the lowest since early February. The figures exclude two of OPEC’s 12 members, Angola and Ecuador.