Brent Trades Near Five-Day Low as Ukraine Risk Muted; WTI Steady

May 28, 2014 8:23 am ET

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May 28 (Bloomberg) -- Brent crude traded near its lowest closing level in five days on speculation that global supplies are adequate and Russian exports will remain unaffected by turmoil in Ukraine. West Texas Intermediate was steady before inventory data.

Futures pared earlier gains of 0.4 percent in London. Ukraine said it will press on with military operations after its forces regained control of Donetsk airport and inflicted “significant” losses on pro-Russian separatists. U.S. government data tomorrow will probably show crude stockpiles rose last week, according to a Bloomberg News survey. The U.S. advised its citizens to leave Libya because of clashes between armed groups in the OPEC member nation.

“We struggle to justify sustained gains,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in a report. While risks to crude supply are underpinning prices, “supply growth continues to outstrip a more modest rise in demand,” he said.

Brent for July settlement was unchanged from yesterday’s close of $110.02 at 1:04 p.m. on the London-based ICE Futures Europe exchange, after rising as much as 38 cents earlier. The volume of all futures traded was about 32 percent below the 100- day average for the time of day. Prices have gained 1.8 percent this month.

WTI for July delivery was 1 cent higher at $104.12 a barrel in electronic trading on the New York Mercantile Exchange. The U.S. benchmark crude was at a discount of $5.90 to Brent on ICE. The spread closed at $5.91 yesterday, the narrowest in six weeks.

Ukraine Crisis

Brent is poised for a second monthly advance amid separatist violence in Ukraine that erupted after Russia annexed the Black Sea peninsula of Crimea in March. Ukrainian President- elect Petro Poroshenko has vowed to wipe out the rebels after winning office on May 25. Ukraine is a conduit for Russian oil and natural gas supplies to Europe.

Troops killed “dozens” of fighters in Donetsk without suffering any losses, Ukraine’s Interior Minister Arsen Avakov said yesterday, while the mayor’s office in the eastern city said 40 people died and 31 were wounded.

The U.S. State Department “warns U.S. citizens against all travel to Libya and recommends that U.S. citizens currently in Libya depart immediately,” it said by e-mail. Turmoil has reduced the nation to the smallest producer in the Organization of Petroleum Exporting Countries.

Protesters in the east of the country shut the recently re- opened oil terminal of Hariga, Oil Ministry Director of Measurement Ibrahim Al Awami said by phone from Tripoli yesterday. Petroleum Facilities Guards members aligned with federalist rebels stopped loadings to protest the appointment of Ahmed Maiteg as the new prime minister, he said.

Fuel Supplies

Crude inventories in the U.S., the world’s largest oil consumer, probably rose to 391.5 million in the week ended May 23, according to the median estimate of eight analysts in the Bloomberg survey. Stockpiles expanded to 399.4 million through April 25, the highest level since the EIA began publishing weekly data in 1982.

Gasoline supplies probably climbed by 250,000 barrels last week, the survey shows. Distillates, including heating oil and diesel, are projected to have dropped by 200,000 barrels.

The EIA, the Energy Department’s statistical arm, will release its weekly stockpile data at 11 a.m. tomorrow in Washington, a day later than usual because of the Memorial Day holiday. The industry-funded American Petroleum Institute is scheduled to publish a separate report today.

“Investors have one eye on what’s happening in Ukraine,” said Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney. “If inventories decline again, the market will focus on it, regardless of ample supply.”

WTI has technical resistance along its 30-day upper Bollinger Band, data compiled by Bloomberg show. Futures halted advances in early March and mid-April near this indicator, at about $105.25 a barrel today. Sell orders tend to be clustered around chart-resistance levels.

--With assistance from Ben Sharples in Melbourne.