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WTI, Brent Crudes Extend Biggest Loss in Two Months on Ukraine

March 5 (Bloomberg) -- West Texas Intermediate crude declined further after falling the most in two months, while Brent slipped on speculation the dispute in Ukraine poses little risk to oil supplies.

Futures slipped 0.5 percent in New York, having lost 1.5 percent yesterday after President Vladimir Putin said he sees no immediate need to invade eastern Ukraine, while the Obama administration threatened sanctions. U.S. crude inventories rose by 1.17 million barrels last week, the American Petroleum Institute reported. Government data today may show stockpiles expanded by 1.3 million, according to a Bloomberg News survey.

“The market is betting on a sort of diplomatic solution” in Ukraine, Hannes Loacker, an analyst at Raiffeisen Bank International AG in Vienna, said today by e-mail. “There should be no significant supply disruptions, as Ukraine is not a significant oil producer and the amount of Russian oil exported via Ukraine is small.”

WTI for April delivery dropped as much as 52 cents to $102.81 a barrel in electronic trading on the New York Mercantile Exchange and was at $103.02 as of 12:36 p.m. London time. The contract lost $1.59 to $103.33 yesterday. The volume of all futures traded was 6 percent below the 100-day average.

Brent for April settlement slid as much as 86 cents to $108.44 a barrel on the ICE Futures Europe exchange. The European crude was at a premium of $5.65 to WTI on ICE, narrowing for a seventh day in the longest run of contractions since November 2011. The spread closed at $5.97 yesterday.

Heating Fuels

WTI advanced 5.2 percent last month as freezing weather boosted demand for heating fuels and crude supplies at the U.S. storage hub in Cushing, Oklahoma, shrank with the opening of a new pipeline.

Stockpiles at Cushing, the delivery point for Nymex futures, declined by 2.63 million barrels in the week ended Feb. 28, the industry-funded API reported yesterday.

Distillate inventories, including heating oil and diesel, fell by 270,000 barrels, the API said. Supplies probably dropped by 1 million, according to the median estimate of nine analysts surveyed by Bloomberg before data from the Energy Information Administration, the Energy Department’s statistical arm.

“We’re now moving away from the winter season and I expect refineries to go off-line for long periods, meaning we could see a larger-than-expected increase in crude supplies,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney.

Chart Support

The API in Washington collects supply information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

WTI has technical support at about $102.70 a barrel today, along the lower boundary of an upward-sloping trend channel that started in mid-January, according to data compiled by Bloomberg. This indicator is near where front-month futures halted intraday losses last week. Buy orders tend to be clustered around chart- support levels.

About 313,000 barrels of crude a day transited via Ukraine in 2013, according to the country’s Energy Ministry. The southern branch of the Druzhba pipeline supplies refineries in Hungary, Slovakia and the Czech Republic. Ukraine’s daily oil output was 80,400 barrels in 2012, according to the EIA.

Top U.S. and Russia diplomats will meet to try to reduce tensions in Ukraine, with U.S. Secretary of State John Kerry due to meet Russian Foreign Minister Sergei Lavrov in Paris today.

Putin said extremists orchestrated a coup to dislodge President Viktor Yanukovych and that Russian speakers in Ukraine’s east and south need protection. Ukraine’s acting President Oleksandr Turchynov has said Russians aren’t at risk, while warning that a military invasion would be an act of war.

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