Oil Set for First Weekly Gain in Four on Ukraine, Gaza

West Texas Intermediate and Brent crude headed for the first weekly gain in a month after a Malaysian Air passenger jet was downed in Ukraine and Israel sent ground forces into the Gaza Strip.

WTI futures were little changed in New York after erasing earlier gains of as much as 0.7 percent. They rose 2 percent yesterday for the biggest gain since June 12. The flight crashed en route to Kuala Lumpur from Amsterdam in the main battleground of Ukraine’s civil war, threatening to escalate the worst crisis between the West and Russia since the end of the Cold War. Israel’s movement of troops and tanks into the coastal enclave marks the first significant ground operation in Gaza since 2009.

“We’ve seen gains two days in a row, maybe just a little light selling heading into the weekend,” Michael Hewson, London-based market analyst at CMC Markets, said by e-mail.“We’re now in a wait and see moment with respect to what happens next. If Russia’s involvement is proved then we could well see further uncertainty.”

WTI for August delivery rose as much as 75 cents a barrel in electronic trading on the New York Mercantile Exchange and was down 19 cents to $103 at 1:57 p.m. London time. The volume of all futures traded was 75 percent above the 100-day average for the time of day. Prices are up 2.1 percent this week and 4.7 percent this year.

Ukraine Conflict

Brent for September settlement erased gains of as much as 73 cents to trade little changed at $108 a barrel on the London-based ICE Futures Europe exchange. Prices gained 1.3 percent this week. The European benchmark crude traded at a premium of $5.95 to WTI for September on ICE, compared with a front-month spread of $5.83 on July 11.

Brent advanced 2 percent on March 3 after Ukraine mobilized its army reserves in response to Russia, the world’s biggest energy exporter, seizing the Black Sea region of Crimea. The U.S. and European Union this week imposed sanctions on Russian banks, and energy and defense firms in the latest attempt to punish the country over Ukraine. OAO Rosneft, Russia’s largest oil company, and natural gas producer OAO Novatek are among those covered by the penalties.

Ukraine’s state security service said it intercepted phone conversations among militants discussing the missile strike, which knocked Flight 17 from the sky about 50 kilometers (31 miles) from the Russian border. U.S. officials said the weapon used in the attack probably was a Russian-made model used widely in eastern Europe.

Israel Offensive

Israel sent soldiers and tanks into Gaza in a ground offensive aimed at stopping the barrage of missiles fired by Hamas and other Palestinian militants after a short-lived cease-fire collapsed earlier in the day.

“Rising prices yesterday and today reflect the political situations in Gaza and Ukraine, and of course there’s potential to go higher,” said Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich, said by phone. “But the fear factor is less influential these days, and as soon as prices go up on a headline you see the sellers come in.”

WTI may gain next week amid speculation rising refinery operations will reduce crude stockpiles in the U.S., the world’s biggest oil consumer, according to a Bloomberg News survey. Nineteen of 39 analysts and traders, or 49 percent, forecast futures will increase through July 25, while 11 respondents said prices will decline.

U.S. crude inventories dropped by 7.53 million barrels last week to 375 million, the Energy Information Administration reported on July 16. Refineries operated at 93.8 percent of capacity, the highest level since August 2005, said the EIA, the Energy Department’s statistical arm.