Oil weekly recap, April 14 – April 17

West Texas Intermediate crude rose on Thursday to close at the second highest level this year and Brent settled near a 1-1/2-month high after another spite of upbeat data from the US fanned positive sentiment for the recovery of the worlds biggest economy. A deal to deescalate the tension in Ukraine at 6-hour-long talks in Geneva was supposed to erode oils geopolitical premium, but the denial of both pro-Russian separatists on ground and their Ukrainian counterparts to comply with the agreement kept prices underpinned.

On the New York Mercantile Exchange, WTI crude for delivery in May rose by 0.52% to $104.58 per barrel on Thursday, the second-highest close this year. Prices ranged between days high and low of $104.78 and $103.54 per barrel. The US crude benchmark added 1 cent on Wednesday and closed the week 0.5% higher.

Meanwhile on the ICE, Brent futures for settlement in June slipped to $109.53 per barrel, down 0.06% on the day, having shifted between $110.19 and $109.08 per barrel. The contract added 0.2% on Wednesday and closed the week 2.3% higher. Brents premium to its US counterpart for settlement in June narrowed to $6.16 a barrel on Thursday, down from $6.57 on Wednesday.

US crude surged on Thursday after data by the Labor Department showed that the number of people who filed for initial unemployment benefits in the week ended April 12th rose by only 2 000 to 304 000, beating analysts expectations for a jump to 315 000.

The number of Americans who continued to receive jobless benefits fell by 11 000 to 2.74 million in the week ended April 5, marking a 6-year low-point. Four-week moving average for new claims dropped by 4 750 to 312 000, registering the lowest number since October 2007.

A separate report showed that manufacturing activity in the Philadelphia region expanded at the fastest pace since October this month. The Philadelphia Fed Manufacturing Index surged to 16.6 from 9.0 in March, outperforming analysts projections for a moderate improvement to 10.0.

A report earlier in the week showed better-than-expected industrial production figures in March. Output in the sector marked a 0.7% increase, beating forecasts of a 0.5% growth, recording a second straight month of expansion. Also, February’s figure was revised from 0.6% to show a 1.2% growth – the highest in 5 months, indicating a strong industrial activity period for the US.

Earlier in the week, better-than-expected retail sales and consumer inflation also helped reassure the US economy had overcome a slowdown in the previous months due to the extraordinary harsh winter this year.

Also providing support to prices, Janet Yellen, chairman of the Federal Reserve, pledged the central bank will continue to support the US economy. Yellen said: ”Persistently low inflation poses a more immediate threat to the U.S. economy than rising prices,” aligning Fed’s policy with inflation and employment rates targets, and signifying that interest rates will stay near zero for some time to come.

Inventories levels

Limiting gains to some extent, the Energy Information Administration reported on Wednesday that US crude oil supplies jumped by 10.0 million barrels to 394.1 million in the week ended April 11th, sharply exceeding the median estimate of analysts surveyed by Bloomberg for a moderate 1.75-million-barrel jump. This was the steepest build up in more than ten years.

US crude imports surged to 8.3 million barrels per day, up by 959 000 barrels from the previous week. Over the last four weeks, inbound shipments averaged 7.5 million barrels per day, 3.9% below the same four-week period last year.

US crude production rose by 72 000 barrels per day to 8.3 million bpd, the highest since April 1988.

Pressure however was limited as the agency’s report also showed that inventories at Cushing, Oklahoma, the biggest US storage hub and delivery points for NYMEX-traded contracts, slid by 771 000 barrels to 26.8 million, the lowest level since October 2009.

Moreover, the EIA reported on Thursday that gasoline consumption averaged over four weeks jumped to 8.83 million bpd in the seven days through April 11th, the highest since January.

Refinery utilization rate picked up last week. Refineries operated at 88.8% of their operable capacity, the highest since January 10th, up 1.3% from a week earlier. Motor gasoline production declined, while distillate fuel output increased, averaging 8.9 million and 4.9 million barrels per day, respectively.

Total motor gasoline inventories decreased by a mere 0.15 million barrels to 210.3 million, while distillate fuel inventories slid by 1.28 million barrels to 111.9 million, defying projections to have remained unchanged.

Ukraine crisis

The energy complex has been drawing heavy support in the last weeks after escalating tension between Russia, the worlds biggest energy producer, and Ukraine threatened to curb energy exports to Europe.

Four-way peace talks in Geneva on Thursday surprisingly ended with an agreement to end the worst standoff between Russia and the West since the Cold War, but pro-Russian separatists and Ukrainian nationalist protesters refused to comply with the accord, implying there will be no easy way to defuse the tension.

According to the deal struck between Russia, Ukraine, the US and the EU, all illegal armed groups are required to disarm and end the occupations of public buildings and streets. However, the armed pro-Russian separatists said they were not bound by any international deals to surrender and they would not leave their posts before the pro-European government in Kiev resigns. At the same time, Ukrainian nationalist protesters also gave no sign of leaving their camps at the Maidan Square, showing the extent of mistrust between the two counterparts.