Crude oil futures fall as US supplies seen rising, Ukraine tensions ease

West Texas Intermediate crude fell after it added more than $1 on Tuesday amid expectations government data due later today will show a ninth consecutive build in US crude oil inventories. Easing tensions in Ukraine after a statement by President Vladimir Putin, coupled with rising exports from Iran, also helped push prices down. Market players eyed the outcome of FOMCs two-day meeting ending today.

On the New York Mercantile Exchange, WTI crude for delivery in May traded at $98.51 per barrel at 7:46 GMT, down 0.37% on the day. Prices shifted in a narrow daily range between $98.39 and $98.64 a barrel. The contract surged 1.3% on Tuesday and closed the session at $98.88, the highest in 2-1/2 weeks. Prices are almost unchanged this week.

Meanwhile on the ICE, Brent futures for settlement in the same month stood at $106.67 a barrel, down 0.11% on the day, having shifted in a daily range between $106.87 and $106.58 a barrel. The European benchmark added 0.5% on Tuesday and settled at $106.79. Brent traded at a premium of $8.16 to its US counterpart, up from $7.91 on Tuesday, based on closing prices.

The oil market gained on Tuesday after Enterprise Products Partners LP said 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 TransCanadas Keystone XL pipeline began moving crude oil from Cushing to Texas in January which reduced supplies at the hub to a two-year low through the week ended March 7th.

However, prices were again pressured after the industry-funded American Petroleum Institute reported that nationwide US crude inventories rose by 5.92 million barrels last week, more than double from what analysts surveyed by Reuters had expected. Government data due later today is expected to show a 2.6-million-barrel build.

The API also reported that distillate fuel inventories fell by 0.674 million barrels last week, trailing analysts forecasts for a 0.9-million drop, while motor gasoline supplies declined by 1.410 million barrels, compared to predictions for a 1.6-million decrease.

The trade associations data however is considered as less reliable than EIAs numbers as they are based on voluntary information provided from operators of refineries, pipelines and bulk terminals, while the government requires reports to be filed with the EIA.

The market was also pressured on Tuesday after Russian President Vladimir Putin said that Moscow is not going to occupy eastern Ukraine and that he does not want to split his neighboring country, easing concern of a further escalation of tension between Russia and the West.

Ben Le Brun, a market analyst at OptionsXpress in Sydney, said for CNBC: “Investors appear to be moving beyond the crisis in Ukraine, but they do still have an eye on potential sanctions against Russia.”

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

Also weighing on the market, data by Reuters showed that Iran shipped more oil than allowed under international sanctions for the fourth straight month in February.