(For Bloomberg fair value curves, see CFVL <GO>.)
March 31 (Bloomberg) -- West Texas Intermediate and Brent crudes dropped as the U.S. and Russia agreed to the need for a diplomatic solution to tensions over Ukraine.
WTI fell for the first time in four days. U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov said after a meeting in Paris that they would hold further talks to seek an outcome acceptable to Ukraine. WTI and Brent gained last week as Russia massed troops along the Ukrainian border. WTI rebounded from the day’s lows as Federal Reserve Chair Janet Yellen said the economy will need further support.
“The weekend talks between Sergei Lavrov and John Kerry didn’t come to any agreement, but there does appear to have been an open exchange of views, which is an improvement over the prior posturing,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “It’s clear that any sanctions on Russia won’t include oil and gas, because Europe is dependent on the supply.”
WTI for May delivery slipped 9 cents to settle at $101.58 a barrel on the New York Mercantile Exchange. Futures advanced 1 percent this month and rose 3.2 percent in the quarter. The volume of all futures traded was 32 percent below the 100-day average at 3:40 p.m.
Brent for May settlement declined 31 cents, or 0.3 percent, to end the session at $107.76 a barrel on the London-based ICE Futures Europe exchange. Prices decreased 1.2 percent this month and 2.7 percent this quarter. Volume was 29 percent below the 100-day average.
The European benchmark crude closed at a $6.18 premium to WTI, the least since March 19.
At the meeting with Kerry yesterday, Lavrov said Ukraine should devolve power to give its regions more autonomy and ensure minority rights. Kerry expressed U.S. concerns that what it estimates to be 40,000 troops massing on Ukraine’s eastern border may signal Russia is ready to invade its neighbor.
“There are going to be more diplomatic talks to try to solve the crisis,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The geopolitical factor is diminishing.”
Russian Premier Dmitry Medvedev arrived in Crimea today in the first visit by a top government official since his country annexed the Black Sea peninsula. President Vladimir Putin has justified Russia’s takeover of Crimea as righting a historical wrong that split the region off from Russia when the Soviet Union collapsed.
The U.S. and European Union have imposed asset freezes and visa bans on Russian, Ukrainian and Crimean individuals.
Equities advanced after the Fed’s Yellen said “considerable slack” in the labor market is evidence that the central bank’s unprecedented accommodation will still be needed for “some time” to put Americans back to work. The Standard & Poor’s 500 Index gained 0.9 percent.
“Yellen is making a it clear that the Fed will continue the easy-money policy and the oil market will benefit from that,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We’re still holding on to most of our gain from last week, which was caused by geopolitical factors.”
Crude output by the 12-member Organization of Petroleum Exporting Countries slipped by 117,000 barrels a day in March to an average 30.293 million, a Bloomberg survey showed. The decrease was led by Angolan and Libyan declines.
Implied volatility for at-the-money WTI options expiring in May was 17.6 percent, up from 17.3 percent March 28, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 306,004 contracts at 3:40 p.m. It totaled 343,851 contracts March 28, 34 percent below the three-month average. Open interest was 1.64 million contracts.