Oil futures settled mixed Thursday as easing geopolitical tensions regarding Ukraine and Russia undercut sentiment over the European Central Bank’s move to lower interest rates.
NYMEX July crude settled 16 cents lower at $102.48/barrel; ICE July Brent settled 39 cents higher at $108.79/b. In products, NYMEX July ULSD settled 3.16 cents higher at $2.8797/gal and July RBOB ended 2.11 cents higher at $2.9563/gal.
The ECB cut its key refinancing interest rate by 10 basis points to 0.15%, the first time the central bank had lowered the rate since a 25 basis-point cut to 0.50% last November.
Soon after the move, the euro dipped to a four-month low $1.3503, while the US Dollar Index on ICE traded to a four month high of 81.02.
A stronger dollar makes oil more expensive, weighing on demand and pushing oil prices lower.
“The European Central Bank move to lower interest rates and boost business lending … is drawing mixed reviews so far,” said Tim Evans, commodity analyst at Citi Futures Perspective.
Evans said economists’ views range from pessimism about the rate cut kick-starting the economy to the move demonstrating the ECB’s determination and ability to act.
“Upon learning that support for the ECB move was unanimous, one observed that the European economy was so weak that ‘even the Germans’ recognized the need to take action,” Evans said.
For the oil market, Evans said, it is the demand weakness rather than the monetary stimulus that will count for more, at least in the near term.
Still, futures were sedate on easing geopolitical tensions as Russian President Vladimir Putin visited Paris Thursday for talks with French President Francois Hollande, regarding diplomacy over Ukraine.
For NYMEX crude, the front-month contract faced follow-through selling as a drop in US crude stocks last week was countered by an increase in refined product stocks.
“The US product market is well supplied, with gasoline stocks moving above the five-year average, while gasoline demand was seen falling 2.2% and total fuel consumption was down 977,000 b/d, which is the biggest drop since December,” said Brian Swan, commodity analyst at Schneider Electric.
Source: Platts.com
