Brent Rebounds on Ukraine After Biggest Loss in Month; WTI Gains

Apr 29, 2014 8:45 am ET

(For Bloomberg fair value curves, see CFVL <GO>)

April 29 (Bloomberg) -- Brent crude rebounded amid additional U.S. sanctions against Russia over the Ukraine crisis, after dropping the most in almost a month yesterday. West Texas Intermediate advanced before fuel inventory data.

Brent climbed as much as 0.7 percent after declining yesterday as Libya prepared to resume oil exports from the eastern port of Zueitina. The U.S. added seven individuals to its sanctions list yesterday, including the chief executive officer of OAO Rosneft, the state-run Russian oil company. U.S. crude supplies probably expanded by 1.1 million barrels last week while gasoline inventories dropped, according to a Bloomberg News survey before an Energy Information Administration report tomorrow.

“The crisis in Ukraine continues to pose a major risk,” Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said in a report. “It has not led to any interruption in oil supplies yet and this leaves the market exposed to downside risk.”

Brent for June settlement gained as much as 72 cents to $108.84 a barrel on the London-based ICE Futures Europe exchange and was at $108.66 at 1:31 p.m. London time. It fell $1.46 to $108.12 yesterday, dropping the most since April 1. The volume of all futures traded was about 20 percent below the 100-day average for the time of day. Prices are up 0.8 percent this month.

WTI for June delivery rose 50 cents to $101.34 a barrel in electronic trading on the New York Mercantile Exchange. U.S. futures’ discount to Brent on ICE was unchanged at $7.28, after narrowing the most in seven months yesterday.

Russia Sanctions

The U.S. yesterday added Igor Sechin, CEO of Rosneft, to its sanctions list along with six other individuals and 17 companies linked to Putin’s inner circle such as InvestCapitalBank and Volga Group. The European Union added 15 individuals to its sanctions list today, including Russian Deputy Premier Dmitry Kozak and separatist leaders in Ukraine, according to a statement in the bloc’s Official Journal.

The U.S. and EU say Russia hasn’t lived up to an accord signed April 17 in Geneva intended to defuse the confrontation between the Ukrainian government and pro-Russian separatists supported by the government in Moscow.

Zueitina Terminal

Libya’s 70,000 barrel-a-day Zueitina terminal is ready to receive tankers for loading, Mohamed Elharari, a spokesman for state-run National Oil Corp., said yesterday. An agreement reached on April 6 provided for the rebels to hand over control of Zueitina and Hariga, two of the four ports they seized in July, in return for an official amnesty and salary payments claimed by defectors from Libya’s Petroleum Facilities Guard.

“News from Libya yesterday that the Zueitina terminal was re-opening for loading sent the price straight down,” said Saxo Bank’s Hansen. “The tug-of-war between the potential for increased supply and worries about disruptions continues to keep the global benchmark range bound.”

Libya, holding Africa’s biggest crude reserves, has become the smallest producer in the 12-member Organization of Petroleum Exporting Countries after protests halted production and shipments. Output shrank to 250,000 barrels a day last month, compared with 1.4 million a year earlier, according to a separate Bloomberg News survey of producers and analysts.

“It’s quite clear that Libya is having an impact on sentiment,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney. The EIA report will probably show a “continuing trend of increasing supply,” he said.

In the U.S., gasoline inventories probably dropped by 950,000 barrels during the week ended April 25, according to the median estimate of six analysts in the Bloomberg survey. Distillate stockpiles, a category that includes heating oil and diesel, are expected to rise by 500,000 barrels. The estimate increase in crude inventories would be the 14th gain in 15 weeks.

--With assistance from Ben Sharples in Melbourne.