Oil weekly recap, March 17 – March 21

West Texas Intermediate crude rose on Friday and ended two straight weeks of losses as renewed tension between Russia and the West raised oils risk premium. Ample US crude supplies and a strong dollar however checked gains. A more positive US economic outlook stemming from policy makers decision to further cut Feds bond buying program and recent upbeat data points fanned positive sentiment.

On the New York Mercantile Exchange, WTI crude for delivery in May rose by 0.57% on Friday to $99.46 per barrel. Prices shifted between a 1-1/2-week high of $100.25 and days low of $98.25 per barrel. The contract lost 0.3% on Thursday but settled the week 0.9% higher, snapping two straight weeks of losses.

Meanwhile on the ICE, Brent futures for settlement in the same month rose by 0.44% on Friday to $106.92 per barrel. The European benchmark crude added 0.57% on Thursday but still settled the week 1.2% lower, a fourth consecutive weekly loss. Brent settled at a premium of $7.46 to its US counterpart, down from Thursdays close at $7.55.

WTI crude rose back to positive weekly territory on Friday after President Vladimir Putin signed legislation needed to annex Crimea and its port of Sevastopol. This happened after Washington expanded its list of individuals to be sanctioned due to their ties to President Vladimir Putin. Broadening of the sanctions to more than 20 prominent Russians marked an escalation of diplomatic pressure against President Putin for Moscow’s intervention in Ukraine.

Gennady Timchenko, allegedly a close ally of President Putin and co-founder of Swiss trading firm Gunvor, was among the newly sanctioned individuals. Gunvor, which had a turnover of $92 billion in 2012, said that Timchenko had already sold his entire stake to his partner, Torbjorn Tornqvist.

US President Barack Obama warned that many segments of the Russian economy might be targeted by broader sanctions, if Russia moves deeper into Ukraine.

Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, said for Bloomberg: “Crude is up on concern that Putin may decide over the weekend that areas of eastern Ukraine might also prefer to be part of Russia.”

Crude inventories

Oils gains however were capped after government data showed on Wednesday that US crude oil inventories rose for a ninth straight week in the seven days through March 14th. 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.

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.

Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut, said for Bloomberg: “We might be up for the day but I believe the market will soon drop because of the fundamentals. Crude inventories continue to climb as we see big gains in U.S. production.”

The American benchmark however drew support as supplies at Cushing, Oklahoma, 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.

Strong dollar, economic outlook

An overall stronger US dollar also pressured the oil market, although it slightly retreated on Friday. The greenback gained against a basket of currencies as policy makers remained on track with Fed’s previous decisions to reduce the central bank’s unprecedented Quantitative Easing program at each successive FOMC meeting and trimmed the bond-buying program by $10 billion to $55 billion per month.

The US dollar index, which measures the greenbacks performance against a basket of six major peers, fell by 0.11% on Friday to 80.261. However, the June contract settled the week 1% higher, having hit a three-week high of 80.505 on Thursday. Strengthening of the US dollar makes dollar-denominated commodities pricier for foreign currency holders and limits their appeal as an alternative investment.

Feds 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.

Better-than-expected economic figures from the US on Thursday provided the energy complex with a better demand outlook. The number of people who filed for initial unemployment benefits in the week ended March 15th was close to a three-month low. Initial jobless claims rose to 320 000, beating projections for a jump to 322 000 from the preceding week’s 315 000.

Meanwhile, manufacturing activity in Philadelphia rebounded in March, with the Philadelphia FED Index registering at 9.0, which outstripped analysts’ expectations for a jump to 3.2 from February’s decline to -6.3. However, sales of previously owned homes matched projections for a drop a 4.6-million annualized rate in February, the lowest since July 2012.