Benchmark Crude Futures Spike

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange rallied on Wednesday, lifting the West Texas Intermediate contract to a three-week high settlement on emerging concerns over available supplies after the Trump administration moved to cut more Venezuelan crude from the global market.

Wednesday afternoon, oil traders also positioned ahead of the American Petroleum Institute's inventory data for the week ended Feb. 14, delayed a day by Presidents Day. Markets expect U.S. crude oil stocks to have increased by 4.8 million barrels (bbl) on the week, with the U.S. refinery run rate expected to have decreased 0.8%. Gasoline stockpiles are likely to have declined by 2 million bbl and distillate supplies are estimated to have decreased by 1.5 million bbl on week.

Oil futures shook off a strong showing of the U.S. dollar, with the greenback advancing a better than three-year high 99.597 settlement against a basket of foreign currencies. A strong U.S. currency makes dollar-denominated crude more expensive for traders in other countries.

On the session, front-month NYMEX March WTI futures rallied $1.24 to $53.29 bbl ahead of expiration Thursday afternoon, with the April contract settling at a $0.20 premium to the expiring contract. ICE April Brent contract surged $1.37 for a $59.12 bbl settlement. NYMEX March RBOB futures moved up 4.85 cents to $1.6633 gallon, reflecting a seasonal uptrend in the gasoline market, and front-month ULSD futures added 3.44 cents to settle at $1.7068 gallon.

Oil's upswing was spurred by a set of stringent sanctions on Russia's Rosneft Trading, the trading arm of oil giant Rosneft, for their involvement in ship-to-ship crude transfers of Venezuelan oil. Markets now expect Venezuela's state-owned oil firm PDVSA to face considerable hurdles to export its sanctioned oil to India and China, where Rosneft is part owner of an oil refinery, Nayara Energy.

Reuters reported Rosneft supplied its trading subsidiary with an average of 3.7 million metric tons of crude and refined products per month in January-November 2019, equivalent to about 20% of Rosneft's total exports. The U.S. Treasury Department gave companies 90 days to scale down activities with Rosneft Trading.

Market sentiment also improved by continued decline in new COVID-19 cases in China, easing some concerns over a deepening viral outbreak in the country's industrial heartland. However, World Health Organization and international experts called for a caution before declaring a slower pace in worldwide infections.

Minutes released from the Federal Open Market Committee's January meeting showed central bank officials grew increasingly alarmed at the fast pace of the spread virus and its potential impact on U.S. economic growth.

"The threat of the coronavirus, in addition to its human toll, had emerged as a new risk to the global growth outlook, which participants agreed warranted close watching," read the minutes released on Wednesday.

Liubov Georges can be reached at luibov.georges@dtn.com

(BAS)

Liubov Georges