WTI futures hit session high as Cushing supplies extend drop, Ukraine tension eases

West Texas Intermediate crude remained on the upside on Wednesday after government data showed that supplies at Cushing, Oklahoma, fell for a seventh week to the lowest in more than two years last week, while nationwide inventories rose twice as expected. Easing tension in Ukraine kept the market pressured, but plans to double the Seaway pipelines capacity and further ease a bottleneck at Cushing, Oklahoma, limited losses.

On the New York Mercantile Exchange, WTI crude for delivery in May traded at $99.12 per barrel at 14:42 GMT, up 0.24% on the day. Prices swung between days high and low of $99.20 and $98.39 per barrel. The US crude benchmark added 1.3% on Tuesday and closed the session at $98.88, the highest in 2-1/2 weeks. Prices are up 0.6% so far this week.

Meanwhile on the ICE, Brent futures for settlement in the same month fell by 0.46% to $106.30 a barrel. Prices slid to a two-month low of $105.81 earlier in the session, while days high stood at $106.87 a barrel. The European benchmark added 0.5% on Tuesday and settled at $106.79. Brent traded at a premium of $7.18 to its US counterpart, up from $7.91 on Tuesday, based on closing prices.

US crude marked a new session high after the Energy Information Administration reported a seventh consecutive drop in stockpiles at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts. Inventories at the hub slid by 989 000 barrels last week to 29.8 million, the lowest level since January 2012.

Gains however were checked by a ninth straight weekly gain in US crude inventories. Supplies rose by 5.9 million barrels in the seven days through March 14th to 375.9 million barrels. This was more than two times the median estimate of analysts surveyed by Bloomberg for a 2.75-million-barrel jump and a 2.6-million increase, according to a Reuters poll.

The build was partially attributed to a drop in refinery utilization rates as units were shut for spring maintenance. Refineries operated at 85.6% of their operable capacity, down 0.6% from the preceding periods four-month low. Gasoline production decreased last week, while distillate fuel output increased, averaging 9.2 million and 4.7 million barrels per day, respectively.

At the same time, US crude production jumped by 33 000 barrels per day to hit 8.22 million bpd, the highest level since 1988. US crude imports fell by 2 000 bpd last week to 7.3 million bpd. Over the last four weeks, crude oil imports averaged 7.2 million bpd, 4.5% below the same four-week period last year.

The report also showed that total motor gasoline inventories fell by 1.5 million barrels in the week ended March 14th to 222.3 million. Meanwhile, distillate fuel stockpiles declined by 3.1 million barrels to 110.8 million, the lowest since May 2008.

The American benchmark continued to draw support after Enterprise Products Partners LP said on Tuesday it would more than double the capacity of its Seaway pipeline, which carries oil from Cushing, Oklahoma, to Houston. The expansion will be ready as early as May, boosting capacity to more than 850 000 barrels per day.

This will further ease a bottleneck at Cushing, the biggest US storage hub and delivery point for NYMEX-traded contracts, after the southern leg of TransCanada’s Keystone XL pipeline began moving crude oil from Cushing to Texas in January which reduced supplies at the hub to the lowest in more than two years.

Gains however remained limited after Russian President Vladimir Putin said on Tuesday that Moscow is not going to occupy eastern Ukraine and that he does not want to split his neighboring country. This eased concern of a further escalation of tension between Russia and the West and possible supply disruptions to Europe.

With the geopolitical tension surrounding Ukraine receding, market players’ attention is now turned toward Fed’s policy meeting. The Federal Open Market Committee concludes a two-day meeting today, the first presided by Fed’s new Chief Janet Yellen. Broad market expectations called for a further reduction of the central bank’s Quantitative Easing program by $10 billion per month, in line with the Federal Reserve’s previous decisions.