West Texas Intermediate oil (NYMEX:CLQ14) fell to a two-week low on concern the shutdown of the Coffeyville refinery in Kansas may reduce crude demand.
The September contract dropped as much as 1.3 percent, narrowing its premium to October futures. CVR Refining LP shut the 115,000-barrel-a-day plant following a fire in an isomerization unit, the company said. The refinery receives crude from Cushing, Oklahoma, the delivery point for WTI futures. Brent (NYMEX:SCQ14) widened its premium over WTI as the U.S. and the European Union prepared to impose tougher sanctions on Russia.
“The Kansas refinery fire is throwing pressure on WTI and strengthening products,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “It’s an important refinery because it’s linked to Cushing.”
WTI for September delivery slid $124, or 1.2 percent, to $100.43 a barrel at 10:08 a.m. on the New York Mercantile Exchange after touching $100.37, the lowest intraday level since July 16. The volume of all futures traded was about 49 percent above the 100-day average.
Brent for September settlement slipped 37 cents, or 0.3 percent, to $107.20 a barrel on the London-based ICE Futures Europe exchange. Volume was 8.1 percent above the 100-day average. The European benchmark crude traded at a premium of $6.73 to WTI on ICE, the biggest since July 4.
CVR owns 1 million barrels of storage at Cushing and leases another 3 million barrels of tanks. Cushing supplies crude to both the Coffeyville and the Wynnewood refinery in Oklahoma, according to CVR.
WTI has gained this year as inventories at Cushing declined after the southern leg of TransCanada Corp.’s Keystone XL pipeline began moving oil to Gulf refineries from the hub in January. Supplies dropped to 18.8 million barrels in the week ended July 18, the lowest level since 2008, according to the Energy Information Administration.
“The Coffeyville refinery fire could boost supplies at Cushing, even briefly over about a week or so, but that’s enough to impact the Cushing spot market and suppress prices until there’s some visibility into the timetable when oil supplies at the hub would decline again,” said Richard Hastings, a strategist at Global Hunter Securities LLC in Charlotte, North Carolina.
The U.S. and EU sanctions will target “key sectors” of Russia’s economy -- finance, defense and energy -- and are being imposed in the face of Russian President Vladimir Putin “doubling down” in support of separatists battling Ukrainian troops, U.S. Deputy National Security Adviser Tony Blinken said yesterday.
“There is plenty of support for Brent and it’s playing out in the Brent-WTI spread moving higher,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.