Oil Futures Rise Amid Easing Cushing Glut and Ukraine Tensions
Oil rig pumpjacks, or thirsty birds, extract crude from the Wilmington oil field near Long Beach, California.Reuters

Crude oil futures inched up on 28 March, and finished higher for the week as a whole, as traders digested news about falling stockpiles at a key US storage hub amid the ongoing tensions between Russia and the West.

May US crude contract inched up 39 cents, or 0.4%, at $101.67 a barrel on 28 March.

US prices gained 2.2% for the week.

May Brent contract added 24 cents, or 0.2%, at $108.07 a barrel on 28 March.

Brent gained 1.1% for the week.

Cushing to Gulf Coast

A storage glut in Cushing, Oklahoma, has been easing, with a pipeline opened in January transporting crude out of the storage hub to the US Gulf Coast.

Supplies in Cushing fell for the eighth consecutive week last week, the US Energy Information Administration (EIA) said on 26 March.

However, some analysts said the focus on Cushing supplies was deceptive, because oil was just moving out of Cushing and entering storage on the Gulf Coast. Supplies on the Gulf Coast struck a historic high last week, EIA data showed.

Ukraine Crisis

Meanwhile, geopolitical concerns also supported prices. Traders were reluctant to bet on lower prices in case tensions between Russia and the West worsened over the weekend.

US President Barack Obama has asked Moscow to withdraw troops from Crimea and start negotiations with Kiev.

The US and its allies have imposed sanctions on Russian and Ukrainian officials, but the measures have not hit Russian oil and natural-gas exports.

"It's basically just shifting around the country," said Tariq Zahir, managing member of Tyche Capital Advisors, referring to shifting US crude stockpiles.

Given how quickly the [Ukraine] situation could escalate, "why would you want to go short over the weekend?" Zahir added.

Commerzbank Corporates & Markets said in a 28 March note to clients: "Brent climbed [on 27 March] on the back of renewed protests in Libya and is trading this morning at just short of $108 per barrel. WTI achieved a three-week high of $101.7 per barrel overnight, continuing to profit from the decline in oil stocks at Cushing. As we stressed [on 27 March], the oversupply is merely being shifted from the Midwest to the US Gulf Coast, where stocks have meanwhile reached a record level.

"The reduction in Cushing stocks is thus overshadowing the fact that the US market is still amply supplied with crude oil. This is also evident from the fact that Light Louisiana Sweet (LLS) is trading at a $4 discount as compared with Brent and that the price differential between LLS and WTI has narrowed to $2.5 per barrel."

"A price gap this narrow means it is no longer profitable to transport oil from Cushing to the US Gulf Coast by pipeline, so it is no doubt merely contractual delivery obligations that are keeping the transport going. Crude oil stocks at the US Gulf Coast are likely to grow further in the coming weeks because refineries will be carrying out maintenance work now that the winter is over and will thus be processing less crude oil.

"Data from consultant firm Oil Movements also confirm that the period of low demand is fast approaching: they suggest that OPEC shipments in the four weeks to 12 April will decline by 620,000 barrels per day. Oil Movements attributes this to weaker seasonal demand from refineries in Asia," Commerzbank added.