WTI futures steady ahead of US inventories data, Ukraine tension

West Texas Intermediate crude rose in early European trading after it closed at the lowest in three weeks the previous day amid fears of escalating tension in the Crimea region. Gains however remained limited amid expectations for US crude supplies to have risen for an eight straight week, while weak data points from China raised fears of softening demand in the worlds second-biggest consumer. Persisting supply concerns from Libya provided support.

On the New York Mercantile Exchange, WTI crude for settlement in April rose by 0.26% to $101.32 per barrel by 8:02 GMT, having shifted in a daily range between $100.86 and $101.43 per barrel. The US benchmark lost 1.42% on Monday, ending a two-day winning streak, and closed the session at $101.12, the lowest settlement since February 14th.

Meanwhile on the ICE, Brent futures for delivery in the same month traded at $108.24 per barrel, up 0.15% on the day. Prices held in range between days high and low of $107.83 and $108.28 a barrel. The European benchmark lost 0.84% on Monday, snapping two days of gains, to settle at $108.08. Brent traded at a premium of $6.92 to its US counterpart after it widened to $6.96 on Monday from Fridays $6.36, based on closing prices.

Oil prices received a boost after Russia said that the US had declined an invitation for a new round of talks aimed at reaching a diplomatic solution to the worst standoff between the two world powers since the Cold War. The United States will begin joint military training drills with its NATO allies in the region for the first time since Russia intervened in Ukraine.

President Barack Obama authorized last week financial sanctions against Russia, while the European Union ceased visa and trade talks and warned of possible economic measures.

In response, Russia said that any US sanctions against Moscow over the conflict in Ukraine will boomerang back on the US.

Tetsu Emori, a commodity fund manager at Astmax Investment, said, cited by CNBC: “The market is driven by geopolitical factors rather than fundamentals, and it is therefore difficult to point to a clearer direction for prices. There is some pressure from the weak Chinese economic data and as the weather pattern improves in North America.”

US inventories

The oil complex was also pressured ahead of a government report that is expected to show an eight consecutive weekly gain in US crude inventories, according to a weekly Bloomberg News survey. Crude supplies are expected to have jumped by 1.85 million barrels in the seven days through March 7th, while both motor gasoline and distillate fuel stockpiles are expected to have declined, by 2.0 million and 450 000 barrels respectively. US crude inventories fell in the previous seven weeks as refineries were shut for seasonal maintenance before restarting in the spring, marking an average utilization rate of 87.4%.

The industry-funded American Petroleum Institute, which gathers voluntary data from operators of refineries, pipelines and bulk terminals, will release its separate figures later today. The trade associations statistics however are considered as less popular than EIAs numbers since the government requires reports to be filed with the Energy Departments agency.

China outlook

The oil market also remained under pressure after a recent series of unexpectedly weak data points from China, the worlds second-biggest economy and oil consumer.

China’s National Bureau of Statistics reported on Saturday that the Asian nation’s exports surprisingly contracted by 18.1% in February on an annual basis, confounding analysts’ expectations for a 6.8% expansion following January’s 10.6% growth. Exports slid by 1.6% for the first two months combined from a year earlier, while they marked a 7.9% full-year rise in 2013. This raised concerns that last month’s poor performance was not solely based on on the Lunar New Year holiday, which began on January 31st.

Meanwhile, China’s imports rose by 10.1% in February, an inch above January’s 10% expansion and beating projections for an 8.0% jump. This led to the Asian economy’s first trade deficit since March 2013 and largest such since February 2012.

Poor consumer inflation data and a slowdown in manufacturing activity to an eight-month low in February also added to the sentiment that China might not be able to reach Premier Li Keqiangs 7.5% growth target for 2014.

Prices however drew some support amid supply worries from Libya, holder of Africas biggest crude reserves. Nationwide output remained at a fraction of its capacity as the 340 000-bpd El Sharara oilfield remained blocked by protesters. Libya’s defense minister held talks last week with the people blocking it, but there was no news whether it will reopen soon. The country currently produces around 230 000 bpd, down from 1.4 million in July.

Meanwhile, a North Korean-flagged tanker which was threatened of getting bombed by government forces after it had loaded crude from a rebel-held terminal was halted by Libyas navy but hasnt reached a government-controlled port yet, Libyas prime minister said on Monday. However, rebel leader Ibrahim Jathran denied in a televised statement to have lost control of the vessel.

The contradicting information and recurring signs of chaos and inability of the government to regain full control of the countrys main source of revenue suggests that a stable crude production recovery is highly unlikely in the short term.