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WTI oil discount to Brent at 1-week low

West Texas Intermediate crude’s discount to Brent was the narrowest in a week as plans to expand a U.S. pipeline buoyed the grade, while easing concern of a Russian supply loss eroded the European benchmark.

WTI was about $7.67 a barrel cheaper than Brent after the gap between the two shrank 8 percent Tuesday.

Enterprise Products Partners LP said it will more than double the capacity of its Seaway pipeline, which moves oil from the U.S. hub in Cushing, Okla., to Houston from as early as May.

Brent, more sensitive than WTI to global supply disruptions, fell 0.5 percent Wednesday amid diminished concern that Russian exports could be curtailed by the dispute with the West following the annexation of Ukraine’s Crimean region.

“There is a divergence between the two grades as Brent weakens on Crimean developments, at least for now, whereas WTI is driven by domestic considerations,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by email. “The announcement of the Seaway pipeline capacity expansion ahead of expectations gave WTI a boost, as the market probably interpreted the news as limiting the scope of future builds of crude stocks at Cushing.”

Brent Premium

WTI for April delivery, which expires Thursday, fell as much as 36 cents to $99.34 a barrel in electronic trading on the New York Mercantile Exchange and was at $99.64 at 9:42 a.m. London time. It climbed 1.7 percent to $99.70 Tuesday, the largest increase since March 3.

The more-active May contract slid 26 cents to $98.62. The volume of all futures traded was about 40 percent above the 100-day average for the time of day.

Brent for May settlement was down 44 cents at $106.35 a barrel on the London-based ICE Futures Europe exchange.

The European benchmark crude’s premium to WTI for the same month shrank to $7.65 a barrel Wednesday on ICE, the narrowest intraday level since March 11.

In Russia, President Vladimir Putin signed an accord Tuesday to annex Ukraine’s Crimea region, showing no sign of backing down from the worst confrontation with the West since the Cold War.

Sanctions threatened by the United States and European Union have failed to dissuade the government in Moscow from claiming the breakaway Black Sea peninsula.

Additional measures

British Prime Minister David Cameron vowed to push European leaders to agree on additional measures against Russia when they meet in Brussels on Thursday.

U.S. President Barack Obama called for a meeting of G-7 nations to discuss Ukraine on March 24. The group has suspended plans for the G-8 Summit in the southern Russian resort of Sochi in June.

“Economic sanctions against Russia don’t look as if they will have any impact on energy prices for now,” Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London, said by email. “So Brent prices are holding in the same sideways range that has been maintained so far this year. Russia will take its time absorbing Crimea into the Russian Federation, and will assess the pros and cons of coercing other parts of Ukraine to secede.”

Brent’s 30-day lower Bollinger Band is at about $106.40 a barrel Wednesday, data compiled by Bloomberg show.

Futures slid below this indicator in intraday trading the past two days before settling above it. Buy orders tend to be clustered around chart-support levels.

U.S. supplies

U.S. crude supplies expanded by 5.92 million barrels in the seven days ended March 14, the American Petroleum Institute said yesterday.

An Energy Information Administration report Wednesday may show stockpiles rose by 2.75 million for a ninth week of gains, according to a Bloomberg News survey of analysts.

WTI lost 3.6 percent last week, the most in more than two months, as U.S. crude inventories increased to 370 million barrels, the highest level since December.

Refinery units are typically shut for maintenance in late winter before restarting in the spring to meet summer demand for gasoline.

Crude stockpiles at Cushing, Okla., the biggest U.S. oil-storage center and the delivery point for WTI contracts, decreased by 1.04 million barrels last week, according to the API.

“Supply does look like the major issue for West Texas and tonight’s data will be clearly watched,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney, who predicts investors may buy WTI contracts if prices decline to about $98.50 a barrel. “The supply picture is pointing to the potential for lower prices over the next week.”

Distillate inventories, including heating oil and diesel, shrank nationwide by 674,000 barrels last week, the API data show. Supplies are projected to drop by 800,000, according to the median estimate of 11 analysts in the Bloomberg survey.

Gasoline stockpiles fell by 1.41 million, the API said, compared with a 1.55 million decline estimated in the survey.

The API in Washington collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines.

The government requires that reports be filed with the EIA, the Energy Department’s statistical arm.

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