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WTI Oil Falls From Three-Week High on Ample Supply; Brent Gains

May 15 (Bloomberg) -- West Texas Intermediate fell from a three-week high after U.S. crude supplies rose and production increased to the most in 28 years. Brent oil gained as Russia warned violence in Ukraine jeopardizes elections this month.

Futures sank as much as 0.6 percent in New York. Stockpiles advanced to near record levels last week as output climbed, the Energy Information Administration reported yesterday. Ukraine pushed on with an operation to flush separatists from their eastern holdout. Russian Foreign Minister Sergei Lavrov said yesterday that Ukraine is sliding into a civil war, making legitimate voting impossible.

“The fundamentals are starting to weigh on WTI,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “It’s hard to justify WTI at over $100 when inventories are near record highs while production is at the highest level in decades. Geopolitical concerns, in particular the unrest in Ukraine, are giving Brent a boost.”

WTI for June delivery slipped 39 cents, or 0.4 percent, to $101.98 a barrel at 9:09 a.m. on the New York Mercantile Exchange. Futures advanced to $102.37 yesterday, the highest close since April 21. The volume of all futures traded was 47 percent above the 100-day average for the time of day.

Brent for June settlement, which expires today, advanced 28 cents, or 0.3 percent, to $110.47 a barrel on the London-based ICE Futures Europe exchange. Volume was 3.2 percent lower than the 100-day average. The July contract rose 9 cents to $109.40.

Brent-WTI

The European benchmark crude traded at an $8.49 premium to WTI, up from $7.82 at yesterday’s close.

U.S. crude stockpiles expanded by 947,000 barrels to 398.5 million in the seven days ended May 9, the EIA, the Energy Department’s statistical arm, said yesterday. Inventories reached 399.4 million barrels in the week ended April 25, the most since weekly reports were published in 1982.

U.S. production increased by 78,000 barrels a day to 8.428 million, the EIA said. A combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies from shale formations in the U.S., including the Bakken in North Dakota and the Eagle Ford in Texas.

In Ukraine, pro-Russian separatist groups were excluded from national unity talks that started in Kiev with the aim of easing tension before the May 25 presidential vote. It would be “ridiculous” for the U.S. and European Union to hold Russia accountable if the election is disrupted, Lavrov said.

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