Brent Rises as Ukraine Cease-Fire Signals More Demand; WTI Gains

Sep 03, 2014 9:01 am ET

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Sept. 3 (Bloomberg) -- Brent crude gained from the lowest close in more than 16 months as Russia and Ukraine took steps toward a cease-fire that may signal revived regional trade. West Texas Intermediate rose from the lowest since January.

Futures rebounded as much as 1.2 percent in London. Russian President Vladimir Putin and his Ukrainian counterpart Petro Poroshenko agreed on steps to reach a cease-fire, Putin’s spokesman Dmitry Peskov said today. An end to hostilities and economic sanctions could stimulate oil demand, said Olivier Jakob, managing director of Zug, Switzerland-based energy consultancy Petromatrix GmbH.

“In the short term, we’re worried about the European economy and the effect of sanctions on growth,” Jakob said. “If there was a solution found to the Ukraine crisis, that would end this round of sanctions and counter-sanctions between Europe and Russia.”

U.S. President Barack Obama said he wants a “follow-up” to the announcement. No halt in hostilities is possible if Russia continues backing rebels in neighboring Ukraine, Obama said today at a news conference in Tallinn, Estonia.

Brent for October settlement gained as much as $1.24 to $101.58 a barrel, and traded at $101.47 at 1:32 p.m. on the London-based ICE Futures Europe exchange. The contract closed yesterday at its lowest since hitting $99.95 on May 1, 2013. The European benchmark traded at a premium of $7.52 to WTI on ICE, compared with $7.46 yesterday.

Fuel Stockpiles

WTI for October delivery advanced as much as $1.09 to $93.97 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $3.08 to $92.88 yesterday, the lowest close since Jan. 14. The volume of all futures traded was about 3 percent above the 100-day average for the time of day. Prices have decreased 4.6 percent this year.

The North American benchmark gained before the release of U.S. supply data that may signal fuel demand in the world’s biggest oil consumer. Crude stockpiles probably shrank by 1 million barrels to 359.5 million last week, a Bloomberg News survey showed before an Energy Information Administration report tomorrow.

U.S. gasoline inventories dropped by 1.45 million barrels to 210.9 million in the week ended Aug. 29, the median estimate in the Bloomberg survey of eight analysts showed. Distillate supplies, including heating oil and diesel, declined by 1.2 million to 121.6 million.

U.S. Jobless

The American Petroleum Institute in Washington is scheduled to release separate stockpile data today. The industry group collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA, the Energy Department’s statistical arm.

The number of Americans filing for the first time for unemployment benefits probably increased by 2,000 in the week ended Aug. 30 to 300,000, according to the median forecast in a separate Bloomberg survey of 48 economists. The U.S. Labor Department will publish jobless claims data tomorrow.

In the North Sea, the Buzzard field remained shut and could restart today, according to a person with knowledge of plans to move a drilling rig at the site. Buzzard, which pumps one of the crude streams used to price the Dated Brent benchmark, was halted Aug. 30, operator Nexen said yesterday. The company didn’t immediately respond to an e-mail today seeking comment of the field’s restart.

Pipeline Fire

Saudi Arabia’s Interior Ministry said yesterday that a fire at a pipeline in the oil-rich Eastern Province near the town of Awwamiya was under control after a shoot-out with police ignited part of the link.

Authorities in OPEC’s largest producer also said they arrested 88 members of a group that was planning attacks inside and outside the kingdom. Militants were seeking to recruit young people, General Mansour al-Turki, a spokesman for the Interior Ministry, said at a televised news conference yesterday. The country has bolstered security after gains in recent months by fighters from Islamic State in Syria and neighboring Iraq.

Production in Libya, another member of the Organization of Petroleum Exporting Countries, rose to 725,000 barrels a day, according to Mohamed Elharari, a National Oil Corp. spokesman.

Ports and oilfields in eastern Libya will continue to increase crude flows in order to help the government defeat Islamist militants, Ali Al-Hasy, spokesman for the Executive Office for Barqa, said by phone from eastern Libya. The Barqa group, seeking greater autonomy for the eastern region, was responsible for a yearlong blockade of ports and oilfields in eastern Libya that ended in July.

--With assistance from Ben Sharples in Melbourne.