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March 28th, 2014 at 3:25 pm
/CL – A review of the various factors impacting the U.S. crude market at the moment.
NEW YORK–Oil futures edged to a three-week high Friday as market participants assessed falling stockpiles at a key U.S. storage hub and ongoing tension between Russia and the West.
Light, sweet crude for May delivery settled up 39 cents, or 0.4%, at $101.67 a barrel on the New York Mercantile Exchange, the highest settlement since March 7.
Brent crude on the ICE futures exchange rose 24 cents, or 0.2%, to $108.07 a barrel. Brent posted a 1.1% gain for the week.
U.S. prices rose 2.2% for the week. A three-day closure of the Houston Shipping Channel due to a fuel-oil spill on Saturday boosted prices early in the week. After Wednesday, traders focused on falling supplies in Cushing, Okla., a key storage hub where the Nymex contract is priced.
A storage glut has built up in Cushing as U.S. oil production rapidly increased without sufficient transportation channels to connect the crude to existing refineries. The bottleneck kept the price of West Texas Intermediate, the U.S. oil benchmark, below that of Brent crude oil, the international benchmark, in recent years.
The glut in Cushing is now shrinking, thanks to a new pipeline that opened in January to transport crude oil out of the storage hub to the Gulf Coast.
Supplies in Cushing fell for the eighth straight week last week, the U.S. Energy Information Administration said Wednesday. Prices climbed on the news.
However, some market watchers have said the focus on Cushing supplies is misleading, because the oil moving out of Cushing is simply entering storage on the Gulf Coast. Supplies on the Gulf Coast hit an all-time high last week, according to the EIA.
"It's basically just shifting around the country," said Tariq Zahir, managing member of Tyche Capital Advisors in Laurel Hollow, N.Y.
Geopolitical concerns are also supporting futures, as traders are hesitant to bet on lower prices in case tensions between Russia and the West worsen over the weekend.
President Obama called on Russia on Friday to pull back its troops from Crimea and start negotiations with the Ukrainian government. The U.S. and other western nations have imposed sanctions on Russian and Ukrainian officials, though the measures have not affected Russian oil and natural-gas exports.
Given how quickly the situation could escalate, "why would you want to go short over the weekend?" said Mr. Zahir.
"We should easily be under $100 a barrel … if it wasn't just for the geopolitical announcements that are out there," he said.