WTI futures pare weekly loss on US data, renewed Ukraine tension

West Texas Intermediate crude rose for a second day, paring what it could be its first weekly decline in eight weeks, after better-than-expected initial jobless claims boosted the US economy outlook and as renewed tension in Ukraine spurred supply fears. Market players awaited the release of crucial nonfarm payrolls data later in the day to gauge the strength of the US economy.

On the New York Mercantile Exchange, WTI futures for settlement in April rose by 0.26% to $101.82 per barrel by 7:34 GMT and shifted in a daily range between $101.67 and $102.03 a barrel. The US benchmark added 0.1% on Thursday after it lost 3.3% in the preceding two days but is on track to post its first weekly decline in eight weeks.

Meanwhile on the ICE, Brent crude for delivery in the same month added 0.19% to trade at $108.30 a barrel, having varied in a range between days high and low of $108.16 and $108.49 a barrel. The European benchmark rose by 0.3% on Thursday. Brent traded at a premium of $6.48 to its US counterpart after it closed at $6.54 on Thursday, up from $6.31 on Wednesday.

Oil prices reversed a two-day decline on Thursday after the US Labor Department reported that the number of people who filed for initial unemployment benefits in the week ended March 1st fell to a three-month low of 323 000, outpacing expectations for a drop to 336 000. The preceding periods reading was revised up by 1 000 to 349 000.

The upbeat figure was a show of strength in the US labor market, which was until recently weighed on by severe winter weather across the US. On Wednesday, payrolls processor ADP reported that private employers in the US added fewer jobs than expected in February, while the previous month’s reading was revised down. ADP Employment Change registered at 139 000, trailing analysts’ projections for a jump to 158 000. January’s reading received a major downward revision to 127 000 from initially estimated at 175 000.

A separate report showed on Thursday that manufacturing activity slowed in the US in January, with Factory Orders declining by 0.7%. That exceeded analysts expectations for a 0.4% contraction, while Decembers reading was revised down to show a 2.0% decline from initially estimated at -1.5%.

Market players attention is turned at the release of Februarys US Nonfarm Payrolls and Unemployment Rate, due at 13:30 GMT, in order to gauge how the worlds biggest economy fared. Recent downbeat readings from the US were largely attributed to frigid weather conditions across the country and todays data will be the first that wont be skewed by weeks of snowstorms.

Ukraine

Renewed worries over peace in Ukraine gave prices a lift after the Moscow-backed parliament of the Crimea region voted on Thursday to join Russia, scheduling a referendum for March 16th, a lot earlier than initial plans for it to be held in May.

As a response, US President Barack Obama ordered sanctions on those responsible for the military intervention, among which bans on travel to the US and freezing their US assets. Obama declared the referendum is a violation of international law, echoing fellow EU and pro-Western Ukrainian leaders. Obama held a one-hour phone call with his Russian counterpart yesterday, persuading Putin to accept a diplomatic solution to the crisis.

Apart from the financial aid that the European Union is ready to provide to Ukraine, the US House of Representatives voted $1 billion in loan guarantees for the country, the first formal response by US lawmakers to the conflict.

Mark Keenan, head of commodities research in Asia at Societe Generale, said for CNBC: “We will continue to see risk premium in relation to the situation in Ukraine. A breakdown in Western-Russian relations can have a knock-on effect on the situation in the Middle East, especially in Syria where Russia did a lot of diplomatic work.”

US inventories

The market however remained under pressure after the Energy Information Administration reported a seventh consecutive weekly gain in US crude inventories on Wednesday, while distillate supplies rose against expectations. Crude stockpiles jumped by 1.4 million barrels in the seven days through February 28th.

At the same time, refineries’ utilization rate slid by 0.6% to 87.4% from a week earlier, while domestic crude production jumped to 8.08 million barrels per day, remaining close to a the 25-year high of 8.16 million bpd which was registered in the week ended January 10th.

Losses were limited as stockpiles at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, registered a fifth straight weekly decline and fell to a two-year low of 32.1 million barrels from 34.8 million a week earlier. However, building up market sentiment that the southern leg of TransCanada’s KeystoneXL pipeline is only transferring Cushing’s bottleneck to the Gulf Coast is worrying some market participants, as the pipeline has had no positive impact on overall crude reserves so far.

The EIA also reported that distillate fuel inventories, which include diesel and heating oil, unexpectedly rose by 1.4 million barrels, defying analysts’ expectations for a drop by 1 million. Total motor gasoline reserves slid by 1.6 million barrels, outperforming forecasts for a 1-million decline, but are above the upper half of the average range.