WTI Oil Rises to Three-Week High on U.S. Data; Brent Advances

Mar 28, 2014 3:32 pm ET

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March 28 (Bloomberg) -- West Texas Intermediate crude reached a three-week high as U.S. consumer spending rose in February by the most in three months. Brent gained on concern that tension in Ukraine will escalate.

WTI advanced for the fifth time in six days. Household purchases, which account for almost 70 percent of the economy, climbed 0.3 percent, the Commerce Department said. Russia massed troops along the Ukraine border after annexing Crimea and rejected a United Nations resolution condemning that takeover.

“The market’s taking the consumer spending number positively,” said Paul Crovo, a Philadelphia-based oil analyst at PNC Capital Advisors. “The economy will continue to forge ahead. There is a lot of concern about what’s going on in Ukraine and Russia’s possible incursions.”

WTI for May delivery rose 39 cents, or 0.4 percent, to $101.67 a barrel on the New York Mercantile Exchange, the highest settlement since March 7. Trading was 33 percent below the 100-day average for the time of day. Prices, which gained 2.2 percent this week, are up 3.3 percent this quarter.

Brent for May settlement increased 24 cents, or 0.2 percent, to end the day at $108.07 a barrel on the London-based ICE Futures Europe exchange. Prices rose 1.1 percent this week, paring the quarterly decline to 2.5 percent. The European benchmark’s premium to WTI narrowed 15 cents to $6.40.

Consumer Purchases

Consumer purchases increased 0.2 percent last month after adjusting spending for inflation, also the best performance since November, the Commerce Department reported. The Standard & Poor’s 500 Index advanced.

“The economy is getting modestly better,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “The oil market is concerned about Ukraine. It’s increasingly difficult to make a bearish case for oil.”

Russia’s military action along the Ukraine border may be an effort to intimidate Ukraine or “it may be that they’ve got additional plans,” President Barack Obama said in an interview broadcast today on “CBS This Morning.”

The U.S. House of Representatives is ready to clear legislation that would provide aid to Ukraine and impose further sanctions on Russian officials for the Crimea annexation.

Cushing Inventories

WTI advanced as inventories at Cushing, Oklahoma, the futures delivery point, fell to a two-year low. Supplies were 28.5 million barrels, the lowest level since January 2012, the EIA, the Energy Department’s statistical arm, said March 26.

Inventories there have decreased since January, when the southern link of TransCanada Corp.’s Keystone XL pipeline started shipping crude to Gulf Coast refineries. Brent’s premium has narrowed by more than half since January.

“We’ve seen a gradual narrowing of the WTI-Brent differential over the past week as prices have climbed,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Cushing is the reason for this narrowing.”

Total U.S. stockpiles have increased 10 consecutive weeks to 382.5 million barrels, the most since November.

WTI may gain next week, according to a Bloomberg News survey. Half of the 28 analysts and traders surveyed forecast prices will rise through April 4.

Implied volatility for at-the-money WTI options expiring in May was 17.3 percent, down from 17.6 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 293,692 contracts at 2:45 p.m. It totaled 456,638 contracts yesterday, 14 percent below the three-month average. Open interest was 1.63 million contracts.