brent oil futures

Brent oil futures

July 17th, 2014

Crude oil West Texas Intermediate rose to a four-day high after U.S. crude stockpiles fell as refiners in the world’s biggest oil consumer boosted processing to the highest level since 2005. Brent advanced in London.

Futures increased as much as 1.5 percent in New York, extending a 1.2 percent gain yesterday. Crude stockpiles shrank by 7.53 million barrels last week, the most since January, while refineries operated at 93.8 percent of capacity, the U.S. Energy Information Administration reported yesterday. President Barack Obama’s administration, acting with the European Union, imposed sanctions on Russian banks and energy and defense companies in its latest bid to punish the country over Ukraine.

“The crude stockpile draw explains why WTI is up a bit,” Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London, said by e-mail. “Russian sanctions do not seem to be worrying the market for now. The bigger picture is the weak crude oil market in Europe.”

WTI for August delivery rose as much as $1.55 to $102.75 a barrel in electronic trading on the New York Mercantile Exchange, the highest since July 11, and was at $102.59 at 1:28 p.m. London time. The contract increased $1.24 to $101.20 a barrel yesterday, the biggest gain since June 12. Prices have advanced 4.2 percent this year.

Brent for September settlement rose 80 cents higher to $107.97 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $6.03 to WTI for the same month on ICE. The August contract decreased 17 cents to $105.85 when it expired yesterday.

Oil Supplies

U.S. crude stockpiles dropped by more than the median estimate of 2.75 million in a Bloomberg News survey of analysts. Supplies at Cushing, Oklahoma, the nation’s biggest oil-storage hub and the delivery point for WTI contracts, slid by 650,000 barrels to 20.3 million in the week ended July 11, said the EIA, the Energy Department’s statistical arm.

“The large, seasonal draw in crude supplies shows demand picking up,” said Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney. “One hundred dollars is a good level of support and we should see a bit of a bounce.”

Gasoline inventories expanded by 171,000 barrels while distillates, including heating oil and diesel, climbed by 2.53 million, the report shows.

Russia Sanctions

The U.S. and EU, which say the government in Moscow is supporting rebels in Ukraine, sought to squeeze Russia’s $2 trillion economy by limiting access to financing. Among those hit by the new penalties are OAO Rosneft, Russia’s largest oil company, and natural gas producer OAO Novatek, the Treasury Department said yesterday.

Gains in crude prices following the new measures will be limited because there’s sufficient spare export capacity and no shortage of global supply, according to Nomura Holdings Inc. and Sapient Global Markets.

“The U.S. and EU are smart enough not to risk derailing the global economic recovery by choking off Russia’s oil exports,” said Gordon Kwan, the regional head of oil and gas research at Nomura Holdings Inc. in Hong Kong.

In Libya, the government may resume exports from Es Sider and Ras Lanuf terminals only next month because of planned maintenance, according to the Oil Ministry. The facilities were handed over this month by rebels seeking self-rule in the east of the country, the holder of Africa’s biggest crude reserves.

- Grant Smith in London at Bloomberg.