MW: Oil reclaims $99; Fed decision, supply data on tap
Market weighs Putin comments on Ukraine; natural gas falls back
SAN FRANCISCO (MarketWatch) — Oil futures headed higher on Tuesday, reclaiming the $99-a-barrel level as traders mulled the outcome of the Federal Reserve’s two-day meeting and weekly data on U.S. petroleum supplies.
The market continued to keep an eye on developments in Ukraine after Crimea voted over the weekend to join Russia, but Russian President Vladimir Putin said Tuesday that the Kremlin’s territorial ambitions in Ukraine did not extend beyond Crimea, which helped to ease worries about global oil supplies.
Crude oil for April delivery CLJ4 +1.03% rose 95 cents, or 1%, to $99.03 a barrel on the New York Mercantile Exchange, after losing 0.8% on Monday as investors downplayed the likelihood of global supply disruptions from the turmoil surrounding Crimea.
Prices for Europe’s benchmark crude traded on ICE Futures edged up Tuesday, with May Brent oil UK:LCOK4 +0.36% adding 12 cents to $106.36 a barrel after taking a 1.8% hit a day earlier.
The biggest factor for oil are rising stock markets around the globe, said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “Fears that the Russian situation would end in violence have eased.”
Putin on Tuesday moved to formally annex Crimea and delivered a speech to both houses of Russia’s parliament dismissing sanctions and other threats by Western powers, while also saying he has no desire to split Ukraine.
The latter remarks buoyed equity markets, boosting European stocks and sending U.S. stock indexes higher .
On edge
“Still, there are other issues that are keeping markets on edge,” said Flynn.
The Federal Reserve will announce its latest monetary-policy decision on Wednesday afternoon, with economists looking for another shift in the central bank’s communication strategy, or forward guidance.
Economic data have also been key factors in the direction for oil. Prices maintained gains Tuesday after economic data showed the consumer price index rose by 0.1% in February, matching forecasts. Separately, the Commerce Department said housing starts fell to an annual rate of 907,000 in February, while requests for new building permits climbed to the highest rate since October.
Meanwhile, problems in Libya are likely to keep a bid under oil prices, said Kirk McDonald, senior analyst at Argent Capital Management. “The U.S. intercept of the illicit oil tanker that attempted to leave Libya highlights the problems of consistently growing oil production in many parts of the world.”
Pre-civil war Libya produced 1.8 million barrels a day of crude and “renewed tensions in the country have caused production to tumble to only about 400,000 barrels a day,” he said. “Many supply/demand models were counting on another recovery in Libyan production this year that looks increasingly unlikely,” said McDonald.
The American Petroleum Institute is also set to release its weekly data on U.S. crude-oil inventory late Tuesday, while the U.S. Energy Information Administration will release its figures Wednesday morning.
Analysts surveyed by energy-information firm Platts expect the data to show crude inventories rose by 2.6 million barrels in the week ended March 14. They also look for a decline of 1.6 million barrels in gasoline stockpiles and a drawdown of 900,000 barrels for distillates, which include heating oil.
On Nymex Tuesday, April gasoline RBJ4 +0.55% was up 1 cent, or 0.4%, at $2.89 a gallon and April heating oil HOJ4 +0.33% was at $2.89 a gallon, almost unchanged.
April natural gas futures NGJ14 -1.48% fell 5 cents, or 1.1%, to $4.485 per million British thermal units after climbing 2.5% in the previous session.
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