WTI Trades Near 3-Week High on U.S.-Russia Talks; Brent Steady

Mar 31, 2014 8:13 am ET

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March 31 (Bloomberg) -- West Texas Intermediate crude traded near the highest close in three weeks as the U.S. and Russia sought to defuse the crisis over Ukraine. Brent stayed near a 14-day peak amid persisting supply disruption from Libya.

Futures were little changed in New York, headed for a quarterly advance of 2.9 percent. U.S. Secretary of State John Kerry said Russia must withdraw forces that are “creating a climate of fear and intimidation” as his counterpart in the Kremlin urged the government in Kiev to give Ukraine’s regions more autonomy. Supplies at Cushing, Oklahoma, the delivery point for WTI, shrank last week for the eighth week to the lowest in two years, the Energy Information Administration said.

“There is a looming tension on Crimea,” said Abhishek Deshpande, oil markets analyst at London-based Natixis. “WTI has been driven by drawdowns in Cushing which are down 42 percent year-on-year. If it continues at the current level of decline we could reach the operational lows come the summer and see WTI cross over Brent as happened last summer.”

WTI for May delivery was at $101.31 a barrel in electronic trading on the New York Mercantile Exchange, down 36 cents, at 12:39 p.m. London time. The contract climbed 39 cents to $101.67 on March 28, the highest close since March 7 and capping a second weekly increase. The volume of all futures traded was about 33 percent below the 100-day average.

Brent for May settlement was at $107.81 a barrel, down 24 cents on the London-based ICE Futures Europe exchange. The March 28 close was the highest since March 14. The European benchmark crude was at a premium of $6.53 to WTI. The spread narrowed for a third day on March 28 to close at $6.40.

Brent is poised for a decline of 2.7 percent this quarter.

‘Diplomatic Path’

WTI has gained this quarter as Russia annexed Ukraine’s Crimea peninsula, citing a need to protect its own citizens and Russian-speaking Ukrainians. About 40,000 Russian troops have been deployed near Ukraine’s eastern border, the U.S. estimates.

Oil has “gone up on the basis of the issues that are between Russia and the U.S.,” Jonathan Barratt, the chief executive officer of Barratt’s Bulletin in Sydney, said by phone today. “The overall trend is bearish for the commodity, looking at what’s happening in terms of economic data.”

After four hours of talks in Paris yesterday, Russian Foreign Minister Sergei Lavrov said he agreed with Kerry on “the need to seek common ground on the diplomatic path for an exit from this situation that will meet the interests of the Ukrainian people,” according to Interfax news service.

Bullish Bets

The U.S. and European Union have vowed to intensify sanctions on Russia’s military, energy and financial industries. Russia faces additional measures that would “seriously hurt” its economy if it pushes further into Ukraine, U.K. Defence Secretary Philip Hammond told BBC yesterday. Russia is the world’s largest energy exporter.

Money managers reduced bullish bets on WTI for a third week, according to the U.S. Commodity Futures Trading Commission. Net-long positions, on futures and options combined, shrank by 3 percent to 293,403 in the week ended March 25, its data on March 28 show.

Bullish bets on Brent dropped for a third week, according to ICE Futures Europe. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 130,072 lots in the week to March 25, the least since Feb. 18, the data show.

Libya’s oil output was 170,000 barrels a day with the Elephant field still halted, Mohammed Elharari, spokesman for state-run National Oil Corp. said yesterday from Tripoli.

Armed people on a skiff attacked an oil tanker as it passed through the Strait of Hormuz, according to a group monitoring piracy at sea.

The unidentified attackers fired twice by machine gun at the tanker’s accommodation area and bridge at about 2:15 p.m. local time yesterday, according to a notice on the London-based International Maritime Bureau’s website.

--With assistance from Heesu Lee in Seoul and Laura Hurst in London.