WTI futures steady as Ukraine tension recedes, EIA oil report in focus

Both West Texas Intermediate and Brent crude benchmarks were mostly unchanged in early European trading on Wednesday as fears of war in Ukraine were curbed after President Vladimir Putin said on Tuesday that he sees no immediate need to invade eastern Ukraine. However, despite reduced, the remaining possibility of an all-out military campaign kept the energy complex underpinned. Market players also eyed EIAs upcoming oil report later today after industry data showed an increase in nationwide crude supplies, while inventories at Cushing fell for yet another week.

On the New York Mercantile Exchange, WTI crude for delivery in April traded at $103.26 per barrel at 7:50 GMT, down 0.07% on the day and held in a narrow daily range between $103.19 and $103.53 per barrel. The US benchmark lost 1.5% on Tuesday after jumping by the most in three months in the previous day and is up 0.75% on weekly basis. Prices touched a 5-1/2-month high of $105.22 on Monday.

Meanwhile on the ICE, Brent futures for settlement in April stood at $108.97 a barrel, down 0.30% on the day after varying between days high and low of $109.36 and $108.97 a barrel respectively. The European benchmark lost 1.7% on Tuesday after it added nearly 2% on Monday and hit a 2-month high of $112.39 a barrel. Brents premium to its US counterpart narrowed for a sixth day to $5.97 yesterday, down from $6.28 on Monday, based on closing prices.

Oil prices gave up most of their previous gains on Tuesday as fears eased that tension in the Crimea region could lead to a war. President Vladimir Putin recalled troops engaged in military drills near the Ukrainian border, saying he does not see any immediate necessity to invade eastern Ukraine.

However, although Putin said that he would use force as a last resort, the reduced, but persisting probability of another escalation of tension kept the energy complex underpinned as Russian forces remained amassed near the border. Europe relies for a third of its natural gas consumption on Russian deliveries and such a shortage could force a switch to alternative energy sources.

Chee Tat Tan, an investment analyst at Phillip Futures in Singapore, said, cited by CNBC: “The threat of war still exists, and we believe it will give good support to crude oil in the near term.”

US inventories

Market players also eyed the upcoming crude oil inventories report by the Energy Information Administration, due at 15:30 GMT. The industry-funded American Petroleum Institute reported late on Tuesday that US crude supplies added 1.17 million barrels in the week ended February 28th, marking a seventh straight weekly gain. However, stockpiles at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, slid for a fifth consecutive week by 2.63 million barrels.

The trade association also reported that distillate fuel inventories declined by 270 000 barrels last week, while motor gasoline supplies saw a 1.2-million withdrawal.

However, API’s figures are considered as less popular than EIA’s data as they are based on voluntary information from operators of pipelines, refineries and bulk terminals, while the government requires reports to be filed with the EIA.

According to a weekly Bloomberg News survey, the government report will likely show crude inventories rose by 1.3 million barrels in the seven days through February 28th, while both distillate fuel and motor gasoline stockpiles saw a 1-million drop.

Meanwhile, the oil market drew support after Chinas Premier Li Keqiang said at the annual meeting of the National Peoples Congress that the Asian economys growth target for 2014 remains unchanged from the previous year at 7.5%, while consumer inflation should be reined at about 3.5%.

“Chinas growth target may not be double digit, but a stable growth gives assurance to investors that a hard landing is unlikely to happen,” said Chee Tat Tan, cited by CNBC.

The announcement came as a fresh breeze of hope after recent downbeat data points from the worlds second largest economy and oil consumer fueled fears over demand prospects. Chinas manufacturing activity plunged to an eight-month low in February, data by the National Bureau of Statistics showed, with its Purchasing Managers’ Index falling to 50.2 from January’s reading of 50.5. A separate private survey by HSBC matched expectations for a rebound to 48.5 from Januarys 48.3, which was the poorest performance since July.