West Texas Intermediate rose for the first time in three days on speculation that inventories decreased at Cushing, Oklahoma. Brent advanced.
Futures increased 0.6 percent. Stockpiles at the WTI delivery point dropped for a 14th time in 15 weeks, four analysts surveyed by Bloomberg said before an Energy Information Administration report on May 14. Prices also gained on expectations that refineries will increase crude processing to produce summer fuels. Brent climbed on concern that the escalating Ukraine crisis will disrupt supplies.
“We have inventories at Cushing being drained,” Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania, said in a phone interview. “We are getting to a point where refinery demand is picking up. We have a lot of supporting fundamentals out there.”
WTI for June delivery rose 60 cents to end at $100.59 a barrel on the New York Mercantile Exchange. The price ranged from $99.93 to $100.93. Oil is up 2.2 percent this year.
Brent for June settlement advanced 52 cents, or 0.5 percent, to $108.41 a barrel on the London-based ICE Futures Europe exchange. The U.S. benchmark crude was at a discount of $7.82 to Brent. The spread widened on May 9 to $7.90.
Cushing supplies decreased to a five-year low of 24 million barrels in the week ended May 2, the EIA, the Energy Department’s statistical arm, said last week. Stockpiles have dropped since January as the southern leg of the Keystone XL pipeline began moving oil to Gulf Coast refineries from the hub.
Carl Larry, president of Oil Outlooks & Opinions LLC in Houston, forecast inventories at the hub dropped 1.5 million barrels in the week ended May 9. Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC, Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois-based consulting company, and Phil Flynn, senior market analyst at the Price Futures Group in Chicago, also predicted a decline.
Morgan Stanley (MS:US) said last week that Cushing storage is two or three weeks away from reaching minimum levels of about 20 million barrels.
“The market is focused on Cushing,” Flynn said. “Refineries are boosting their production.”
U.S. refineries kept their utilization rate above 90 percent in the week ended May 2 for a third time, according to the EIA. The rate may have advanced 0.5 percentage point last week, according to the Bloomberg survey.
Brent also rose for the first time in three days after Russia indicated it “respects” the results of two disputed referendums in eastern Ukraine, which separatists said backed independence. The European Union added companies to its list of sanctions for the first time.
Russia praised the high turnout in yesterday’s ballots, according to a statement e-mailed today by President Vladimir Putin’s press service. The U.S. and the EU deem the votes illegal and the government in Kiev called them a “farce.”
“Ukraine is providing some support,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We do have some geopolitical risks in the market, and that’s why Brent has difficulties to turn too far away from $110.”
Russia produced 10.4 million barrels a day of oil in 2012 and exported 7.4 million, according to the EIA. The southern part of the Druzhba pipeline carries 300,000 barrels a day of Russian crude through Ukraine to refineries in Hungary, Slovakia and the Czech Republic.
Implied volatility for at-the-money WTI options expiring in July was 14.9 percent versus 15.3 percent May 9, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 382,939 contracts at 2:52 p.m. It totaled 558,653 contracts May 9, 3.8 percent above the three-month average. Open interest was 1.64 million contracts.
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