Oil weekly recap, March 24 – March 28

Both West Texas Intermediate and Brent crude benchmarks rose on Friday and closed the week higher, supported by upbeat data from the US and concerns that tension in Ukraine may escalate. Supplies at the biggest US storage hub dropping to a two-year low, coupled with supply outages in Nigeria and Libya, further supported the market.

On the New York Mercantile Exchange, WTI crude for delivery in May rose by 0.4% to $101.67 per barrel on Friday, the highest close since March 7th. Prices shifted in a daily range between a three-week high of $102.24 and $101.18 per barrel. The US benchmark rose by 1% on Thursday and closed the week 2.2% higher, settling the quarter 3.3% on the upside.

Meanwhile on the ICE, Brent futures for delivery in the same month rose by 0.22% to $108.07 per barrel on Friday, having shifted in a daily range between $108.39 and $107.62. The European crude benchmark added 0.75% on Thursday and settled the week 1.1% higher, trimming its quarterly decline to 2.5%. Brents premium to its US counterpart narrowed to $6.40 on Friday from $6.55 on Thursday, based on closing prices.

US crude continued to draw support after a recent series of upbeat data showing the worlds biggest economy has recovered from an extraordinary harsh winter boosted demand outlook. Data by the Commerce Department showed that household spending, which accounts for 70% of the US economy, rose by 0.3% in February from a month earlier and matched analysts expectations. Personal income also rose by 0.3%, in line with expectations.

Real consumer purchases, after being adjust for inflation, jumped by 0.2% in February, the most since November, beating analysts projections for a 0.1% growth. Core Personal Consumption Expenditures gained 0.1%, matching forecasts and the previous periods growth.

Earlier in the week, data showed that the US economy expanded at a 2.6% annualized rate in the final three months of 2013, slightly below analysts’ expectations of a 2.7% gain, but up from a preliminary estimate of 2.4%, a report by the the Bureau of Economic Analysis showed. The US gross domestic product grew by 4.1% in the third quarter.

Personal consumption expenditures rose 3.3% in the fourth quarter, the most since the final three months of 2010, exceeding analysts’ projections of a 2.8% increase and up from an initial estimate of 2.6%. Consumer spending is regarded a key economic indicator as it typically accounts for almost 70% of the US economic growth.

Strong consumer spending on services, especially in the health care sector, helped boost the expansion, a sign this year’s slowdown can be partly attributed to the inclement weather.

The Commerce Department had also reported a surprisingly large jump in orders for durable goods in the US. Bookings for items meant to last more than three years rose by 2.2% in February, reflecting solid growth in demand for autos. Analysts had expected a moderate rebound to 1% growth from the preceding period’s downward revised 1.3% contraction. This comes after data by the Conference Board showed on Tuesday that US consumer confidence jumped to a six-year high in March.

Paul Crovo, a Philadelphia-based oil analyst at PNC Capital Advisors, said for Bloomberg: “The market’s taking the consumer spending number positively. The economy will continue to forge ahead. There is a lot of concern about what’s going on in Ukraine and Russia’s possible incursions.”

Ukraine, Russia

The markets were also pushed higher after renewed fears of escalating tension between Moscow and the West spurred concerns over disruptions in oil supplies from Russia, the worlds biggest producer. The US and NATO have voiced alarm over the Russian military that has been amassed near the countrys border to Ukraine.

On Wednesday, the US and the EU agreed to work on preparing possible tougher economic sanctions against Russia, including its energy sector, and also reduce Europe’s dependence on Russian energy exports. President Obama warned after a meeting with European leaders that Moscow’s isolation will deepen, if it continues its current course.

Obama said on Thursday in Rome that the US and its allies are closely studying Russia’s military, energy and finance sectors to determine which sanctions could have the most powerful impact, if a new round of penalties should be imposed. The US Senate and House of Representatives passed bills imposing additional sanctions on Russian officials with allegedly close ties to President Vladimir Putin.

Also spurring supply concerns, output in Libya, holder of Africa’s biggest crude reserves, fell further after protesters blocked a 30 000-bpd pipeline from the southwestern al-Wafa oilfield to the Mellitah export terminal.

The state-run National Oil Corporation said earlier in the week that nationwide crude output in Libya has fallen to around 170 000 barrels per day as export terminals and oilfields remain blocked amid political turmoil. The 340 000-bpd El Sharara oilfield, Libya’s second-largest, remained closed for another week, while the 130 000-bpd El Feel field was also shut.

US crude inventories

US crude drew heavy support and narrowed its discount to Brent after the Energy Information Administration reported on Wednesday that supplies at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, fell for an eight consecutive week in the seven days through March 21st. Supplies at the hub slid 1.33 million barrels to a two-year low of 28.5 million.

According to half of the respondents in a Bloomberg News survey, West Texas Intermediate crude may extend its gains next week.

Nationwide inventories jumped for a tenth week, limiting price gains. Stockpiles grew by by 6.6 million barrels last week to 382.5 million barrels, the highest since November. Analysts had expected a 2.5-million jump.

Total motor gasoline inventories fell by 5.1 million barrels to 217.2 million, outstripping expectations for a decline of 1.7 million barrels, as gasoline demand jumped by 5.8% to a three-month high of 9.002 million bpd. Distillate fuel inventories, which include diesel and heating oil, rose by 1.56 million barrels to 112.4 million, defying analysts’ projections for a 1.1-million-barrel drop.