Weak products market seen limiting upside
By William L. Watts, MarketWatch
NEW YORK (MarketWatch) — Oil futures pushed back above $100 a barrel after U.S. data showed crude inventories fell back from a record and traders continued to monitor turmoil in Ukraine, although a weak products market was expected to keep a lid on prices.
Nymex WTI crude for June delivery CLM4 +0.71% rose 70 cents, or 0.7%, to $100.20 a barrel. ICE Brent crude futures UK:LCOM4 +0.31% gained 14 cents, or 0.1%, to $107.20 a barrel.
The American Petroleum Institute late Tuesday said U.S. crude supplies fell 1.8 million barrels in the week ended May 2. Platts had forecast a climb of 1.3 million barrels. The API also said gasoline stocks rose around 2.5 million barrels, while distillate supplies rose 763,000 barrel, versus forecasts for gasoline stockpiles to fall 900,000 barrels and for distillate supplies to rise by 1.5 million barrels. The Energy Information Administration will issue its report Wednesday morning.
“The U.S. market likely found some support in API inventory data,” wrote strategists at JBC Energy, in a note. Supplies at Cushing, Okla., the Nymex WTI delivery hub, also fell, which likely provided additional support for Nymex futures.
But oil analysts noted that upside remains limited with supplies near record levels, while tighter refining margins are also seen limiting upside. The so-called crack spread between Brent and gasoil fell to below $13 a barrel this week, while the differential between U.S. gasoline and WTI crude has narrowed by $3 to $21 a barrel, said Eugen Weinberg, commodity strategist at Commerzbank in Frankfurt.
The crack spread is the differential between the price of crude and the products produced by refining it.
Analysts said traders have been paying little attention to the continued turmoil in Ukraine. Russian President Vladimir Putin on Wednesday said he is prepared to discuss a “way out” of the situation in Ukraine with the head of the Organization for Security and Cooperation in Europe.
News reports said fresh fighting broke out in Ukraine as government forces pushed into the pro-Russian city of Mariupol. Ukrainian troops temporarily seized control of the city hall from pro-Russian activists but then withdrew, with pro-Russian activists then re-taking control of the building, reports said.
