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Both West Texas Intermediate and Brent crude benchmarks rose in early European trading on Thursday after government data showed yesterday a seventh consecutive drop in Cushing supplies, while stockpiles of refined products also fell. Although it strengthened the US dollar, policy makers decision to cut Feds monetary stimulus by another $10 billion per month fanned positive sentiment for the economic outlook of the worlds biggest oil consumer. Albeit eroded, oils geopolitical premium stemming from the tension in Ukraine kept prices underpinned.

On the New York Mercantile Exchange, WTI crude for delivery in May traded at $99.31 per barrel at 8:10 GMT, up 0.13% on the day. Prices shifted in a narrow daily range between a one-week high of $99.45 and $99.08 a barrel. US crude added 0.3% on Wednesday and settled at $99.17.

Meanwhile on the ICE, Brent futures for settlement in the same month were up 0.15% at $106.01 a barrel, having varied in a daily range between $106.23 and $105.75 a barrel. The European crude benchmark lost 0.9% on Wednesday and closed at $105.85 a barrel. Brent traded at a premium to its US counterpart of $6.70. The gap narrowed on Wednesday to close at $6.68, down from Tuesdays settlement at $7.91.

US crude shrank its discount to Brent on Wednesday after the Energy Information Administration reported a seventh consecutive drop in stockpiles at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts. Inventories at the hub slid by 989 000 barrels last week to 29.8 million, the lowest level since January 2012.

The American benchmark continued to draw support after Enterprise Products Partners LP said on Tuesday 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 TransCanada’s Keystone XL pipeline began moving crude oil from Cushing to Texas in January which reduced supplies at the hub to the lowest in more than two years.

Some market analysts however feared that the supply drainage from the hub only moved the bottleneck from Cushing to the Gulf Coast, which itself has limited-to-no impact of nationwide inventories.

Nationwide inventores

The EIA reported a ninth straight weekly gain in US crude inventories. Supplies rose by 5.9 million barrels in the seven days through March 14th to 375.9 million barrels. This was more than two times the median estimate of analysts surveyed by Bloomberg for a 2.75-million-barrel jump and a 2.6-million increase, according to a Reuters poll.

The build was partially attributed to a drop in refinery utilization rates as units were shut for spring maintenance. Refineries operated at 85.6% of their operable capacity, the lowest since April, down 0.6% from the preceding period. Gasoline production decreased last week, while distillate fuel output increased, averaging 9.2 million and 4.7 million barrels per day, respectively.

At the same time, US crude production jumped by 33 000 barrels per day to hit 8.22 million bpd, the highest level since 1988. US crude imports fell by 2 000 bpd last week to 7.3 million bpd. Over the last four weeks, crude oil imports averaged 7.2 million bpd, 4.5% below the same four-week period last year.

The report also showed that total motor gasoline inventories fell by 1.5 million barrels in the week ended March 14th to 222.3 million. Meanwhile, distillate fuel stockpiles declined by 3.1 million barrels to 110.8 million, the lowest since May 2008.

US economy outlook

Although it strengthened the US dollar, oil prices drew support as policy makers decision to cut Feds monthly bond purchases by another $10 billion fanned positive sentiment for the US economys recovery state.

Policy makers remained on track with Feds previous decisions to reduce the central banks unprecedented Quantitative Easing program at each successive FOMC meeting and trimmed the bond-buying program to $55 billion per month. The monetary easing program is expected to be brought to an end this fall.

Moreover, Federal Reserve Chair Janet Yellen, who presided her first FOMC meeting, said at a following conference that the first increase in borrowing costs should come “around six months or that type of thing” after the end of the stimulus program. Policy makers also scrapped the unemployment-rate threshold for considering when to raise interest rates and said it will look for a wider range of data.

Mark Keenan, head of commodities research in Asia at Societe Generale, said for CNBC: “The consensus is now that the winding down of easy money is happening because the economy is strong enough to stand on its own two feet. I think investors take a degree of confidence from Yellens comments. And while still fragile, there is a prospect of real economic growth, which will underpin commodities, including oil.”

The market also continued to draw some support after Russian troops seized two Ukrainian naval bases on Wednesday, including a headquarters in the port of Sevastopol.

The market had previously lost some if its geopolitcal premium after Russian President Vladimir Putin said on Tuesday 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.

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