Oil weekly recap, April 21 – April 25

West Texas Intermediate crude fell on Friday to the lowest in two weeks and marked its first weekly decline in three, pressured by US crude supplies rising to the highest level on record. Brent crude also fell on Friday but movement to the downside remained limited as the European benchmark continued to draw support on rising tensions in eastern Ukraine.

On the New York Mercantile Exchange, WTI crude for delivery in June fell by 1.31% to $100.60 per barrel on Friday, having fallen to a daily low of $100.48 a barrel, the weakest level since April 7nd. The American crude benchmark added 0.49% on Thursday but settled the week 2.7% lower, widening its discount to Brent.

Meanwhile on the ICE, Brent futures for settlement in the same month slid by 0.68% on Friday to $109.58 per barrel, having shifted in a daily range between days high and low of $110.63 and $109.25 per barrel. The contract added 1.1% on Thursday. Brents premium to its US counterpart widened to $8.98, up from Thursdays close at $8.39.

US crude remained heavily pressured throughout the week after a bearish supplies report by the Energy Information Administration showed US crude oil inventories rose to the highest on record last week. Stockpiles rose by 3.524 million barrels to 397.7 million, exceeding expectations of a 2.3-million barrels increase.

US crude imports stood at 7.8 million barrels per day for the week through April 18th, down 475,000 barrels from the previous five-day period.

Domestic crude production registered at 8.360 million barrels per day, 59 000 higher than last week’s figure. Refinery utilization rate also picked-up pace, to score 91.0%, up from last week’s 88.8%. Gasoline production, however, decreased last week, averaging 8.9 million bpd, while distillate fuel output picked up to 5.0 million barrels per day.

The only bullish sign for oil coming from the report was that supplies at Cushing, Oklahoma, dropped to 26.0 million barrels, down 800,000 from last week’s reading. This was the lowest level since October 2009. The decline, however, is in-line with recent outflows from Cushing and towards the Gulf coast.

Motor gasoline and distillates figures also fanned significantly negative sentiment, with gasoline inventories having dropped by 0.274 million barrels for the week, far below the expectation of a 1.713-million decline, while distillate fuels gaining 0.597 million barrels in supplies, in contrast to a forecast of a 0.463-million decline.

Will Yun, a commodities analyst at Hyundai Futures Co. in Seoul, said for Bloomberg: “The expanding stockpiles in the U.S. further widen the spread between Brent and WTI. U.S. crude supplies are expanding, which can still drive WTI prices down. Brent is more influenced by geopolitical issues between Ukraine and Russia.”

Ukraine crisis escalation

The heating of tensions in Ukraine was the strongest force behind crude gains yesterday. The interim government reported that security forces had killed at least two pro-Russian separatists. The raids prompted Russian President Vladimir Putin to warn the pro-western authorities in Kiev that they will face “consequences”, while ordering troops near the border to begin military exercises. A Russian TV station quoted Vitaly Churkin, Moscow’s ambassador to the UN, as saying that Russia would have legal basis to send “peacekeepers” to Ukraine.

According to the Interfax-Ukraine news agency, acting Ukrainian defense minister said on Friday that Moscow has tens of thousands of troops along the border and that they had come within a kilometer of the frontier. Yesterday the UK said that Russian aircraft were detected approaching northern Scotland, and the Netherlands, Denmark and the United Kingdom all sent jets to escort the approaching aircraft away from their airspace.

Elsewhere, the BBC reported that accounts from the port city of Odessa indicated that an explosion at a checkpoint injured at least seven people earlier today.

The Kremlin asked the US to exercise its influence and persuade the Ukrainian government to stop its crackdown on the eastern separatists. At the same time the US accused Moscow of inciting the unrest. US Secretary of State John Kerry said: “Not a single Russian official has publicly gone on television in Ukraine and called on the separatists to support the Geneva agreement.” He added that US intelligence was certain Russia was “playing an active role in destabilizing eastern Ukraine with personnel, weapons, money and operational planning.” Reuters reported that U.S. President Barack Obama will try to agree more coordinated sanctions against Russia when speaking to European leaders today, according to anonymous sources.

US data

Albeit strengthening the US dollar, better-than-expected economic data from the US fanned positive sentiment for demand prospects in the worlds top consumer. According to the monthly report on durable goods orders for the US, released on Thursday, March brought improving demand for lasting products, registering a 2.6% growth from February. Orders for Core durable goods, which exclude transportation items bids, also rose to record a growth of 2.0% on a monthly basis, exceeding the 0.6% forecast. Figures on jobless claims added to positive outlooks for the world’s largest economy on Thursday as well, as the 4-week average of claims added only 4 750, while continuing jobless claims shrank by 61 000 to a total of 2.680 million, down from last week’s 2.741 million claims.

The quarterly Gross Domestic Product report for the US is due next week. Forecasts project a growth of 1.1%, though recent strong data is set to push the figure up.

On Friday, the Thomson Reuters/University of Michigan Consumer Sentiment index rose to 84.1 in April, the highest since July. Analysts had expected a minor advance to 83.0 from the preliminary reading of 82.6 earlier this month. This compared to a four-month low of 80 in March.

The upbeat reading reflected Americans positive sentiment as labor market conditions steadily improve. Consumers were the most optimistic about current conditions since July 2007.

Brett Ryan, an economist at Deutsche Bank Securities Inc. in New York, said, cited by Bloomberg: “Consumer sentiment continues to chug higher. It means people are getting jobs or incomes are increasing or they feel a little bit more stable about their situation.”