July 22 (Bloomberg) -- West Texas Intermediate crude widened its discount to Brent as the European Union warned that Russia risks growing isolation over the downing of Malaysian Air flight MH17.
The more actively-traded September WTI contract dropped while August WTI, which expires today, was little changed. The EU pressed President Vladimir Putin to speed a probe into the downing of the plane as European foreign ministers met in Brussels to discuss further sanctions against Russia. U.S. crude supplies may have slid 2.9 million barrels last week, according to a Bloomberg survey before a government report tomorrow.
“The geopolitical situation definitely affects Brent more,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “You have storage numbers tomorrow. It’s a headline market.”
September WTI crude was down 27 cents, or 0.3 percent, at $102.59 at 11:33 a.m. on the New York Mercantile Exchange. August futures rose 9 cents to $104.68. The contract closed at $104.59 yesterday, the highest level for a front-month contract since July 1. The volume of all futures was 1.7 percent above the 100-day average
Brent for September settlement gained 2 cents to $107.70 a barrel on the London-based ICE Futures Europe exchange after earlier increasing as much as 0.7 percent. The volume of all futures was 16 percent below the 100-day average.
“WTI ran up yesterday a little bit too much,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The Brent-WTI spread is widening again. We are seeing some geopolitical concern creeping into Brent.”
WTI traded at a discount of $5.09 to Brent on ICE for the same month, compared with $4.82 yesterday, the narrowest since April 11.
The spread has gotten “a little ahead of itself,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “There is still concern about Ukraine. It has more impact on Brent than WTI.”
Brent rebounded last week for the first weekly gain in a month after Flight 17 was shot down over rebel-held territory in eastern Ukraine, killing all 298 passengers and crew. The incident threatened to intensify the worst crisis between the West and Russia since the end of the Cold War.
The downing of MH17 has galvanized sentiment against Russia in the EU, which had moved slower on sanctions than the U.S. Putin is trying to refute accusations from Ukraine and its U.S. and EU allies that rebels shot down the aircraft over their territory and that it supplied the insurgents with the surface- to-air missile that they used.
“Today we are seeing a little more concern about the Ukraine crisis,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “People are expecting lower U.S. crude inventories because of high refinery runs.”
Total U.S. stockpiles fell by 7.53 million barrels in the week ended July 11, the biggest decline since January, the Energy Information Administration reported last week. U.S. refineries operated at 93.8 percent of their capacity, the highest since 2005.
Inventories at Cushing, Oklahoma, dropped 650,000 barrels to 20.3 million, the lowest since 2008, according to the Energy Department’s statistical arm. Oil at the delivery point for WTI flowed to the Gulf Coast as prices there were much higher.
WTI was $6.35 below Light Louisiana Sweet crude on the Gulf Coast today, the biggest discount since February, according to data compiled by Bloomberg.