BDL:Brent steady but plentiful oil supply may weigh
LONDON — Brent crude held steady below $108 a barrel on Tuesday as clashes across Ukraine helped support a market that might otherwise buckle from ample supply, especially in the US, the top oil consumer.
Data showing a spike in US service sector growth also offered some relief from disappointing manufacturing data in China, the world’s second-biggest user of oil.
Brent crude was up 14c at $107.86 a barrel by 8.46am GMT. US oil was up 16c at $99.64.
"The services data add more evidence that the US economy is indeed recovering, helping lift the prospect for crude oil demand in the United States," said Chee Tat Tan, an investment analyst at Phillip Futures in Singapore.
In Ukraine, pro-Russia rebels shot down a Ukrainian helicopter in fierce fighting near the eastern town of Slaviansk, while Kiev drafted police special forces to the port city of Odessa to stop the rebellion spreading westward.
In one of the first signs that the conflict has affected Russian energy shipments, Russia’s state pipeline operator stopped diesel shipments to Ukraine and Hungary last month due to uncertainties over the pipe’s ownership.
Rising US stocks
Oil’s gains are being capped by plentiful supplies, with US commercial crude inventories forecast to have hit a record high for a third straight week due to higher imports.
The American Petroleum Institute, an industry group, is due to issue its weekly inventory report at 8.30pm GMT, while the US Department of Energy’s Energy Information Administration (EIA) will issue its report on Wednesday.
A preliminary Reuters poll of five analysts, taken ahead of the reports, showed expectations centring on a rise of 1.5-million barrels in crude oil stocks for the week ended May 2.
EIA data wiped off nearly 2% from US oil futures over two days last week by showing US crude stocks hit a record high in the week to April 25, led by another steep increase on the Gulf Coast.
However, in Cushing, Oklahoma, the delivery point of West Texas Intermediate (WTI) crude, crude stocks have dropped in the last three weeks, as new infrastructure relieves recent bottlenecks at the key oil hub.
"A 1.5-million-barrel draw per week could put Cushing two to three weeks away from reaching tank bottoms," Morgan Stanley said in a research note.
"If realised, the benefit for WTI prices and differentials may be modest from here, but backwardation at the front end of the WTI curve should steepen."
Higher Libyan exports have also pressured oil prices. The country’s oil production currently stands at 250,000 barrels a day, but the vital southern El Sharara oilfield remains closed, a spokesman for state-run National Oil Corp said on Monday.
