Brent Crude Rises as Ukraine Fighting Intensifies; WTI Steady

Jul 23, 2014 8:32 am ET

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

July 23 (Bloomberg) -- Brent crude advanced as fighting intensified between government and rebel forces in Ukraine. West Texas Intermediate traded near its lowest closing price in two days after an industry report showed U.S. gasoline supplies expanded.

Futures climbed as much as 0.5 percent in London. Rebels downed two Ukrainian SU-25 fighters aircraft today in the Donetsk region, Defense Ministry spokesman Oleksiy Dmytrashkovsky said by phone. A Grad missile hit a fuel tank at a depot in Tripoli early today, the Libya Herald reported. Gasoline inventories increased by 3.6 million barrels last week, the American Petroleum Institute was said to have reported yesterday.

“The situation in Ukraine and worries about Libyan deliveries are driving oil’s risk premium,” Thina Saltvedt, an analyst at Nordea Bank AG in Oslo, said.

Brent for September settlement rose as much as 54 cents to $107.87 a barrel, before trading 27 cents higher at $107.60 a barrel on the London-based ICE Futures Europe exchange at 1:08 p.m. The European benchmark crude traded at a premium of $5.18 to WTI on ICE, after closing at $4.94 yesterday.

WTI for September delivery was little changed at $102.42 on the New York Mercantile Exchange. The August contract expired yesterday after losing 17 cents to $104.42. The volume of all futures traded was about 28 percent below the 100-day average for the time of day. Front-month prices have climbed 4.1 percent this year.

Fuel Supplies

U.S. gasoline inventories probably increased by 1 million barrels to 215.5 million barrels in the seven days ended July 18, according to the median estimate of nine analysts surveyed by Bloomberg.

Crude supplies are projected to have declined by 2.9 million barrels to 372.1 million, the survey shows. The Energy Information Administration, the Energy Department’s statistical arm, will publish its report at 10:30 a.m. in Washington today.

“There’s some nervousness that the demand that was anticipated isn’t coming through, so we’ll see a cautious session leading into those numbers,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone.

Crude stockpiles shrank by 555,000 barrels last week, said the API, according to people familiar with its data. Supplies at Cushing, Oklahoma, the nation’s largest storage hub and the delivery point for WTI contracts, slid by 1.4 million, said the industry group, which collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines.

Malaysian Jet

Brent rebounded last week for the first weekly gain in a month after Flight MH17 was shot down over rebel-held territory in eastern Ukraine, killing all 298 passengers and crew. The incident threatened to intensify the worst crisis between the West and Russia since the end of the Cold War.

The European Union will consider restricting Russia’s access to capital markets and sensitive technologies unless President Vladimir Putin expedites the investigation of the plane crash, three officials said yesterday.

The missile strike on July 17 came hours after the U.S. and EU imposed a new round of sanctions on banks and energy and defense firms to punish the government in Moscow over its annexation of Crimea in March. OAO Rosneft, Russia’s biggest oil company, and natural gas producer OAO Novatek were among those covered by the penalties.

--With assistance from Jake Rudnitsky in Moscow.