Today (Monday), U.S. oil futures hit a five-month high on fallout from the Ukraine conflict, further supported by inclement weather across the United States.
On the New York Mercantile Exchange (NYMEX), West Texas Intermediate (WTI) crude for delivery in April rose to a session high of $104.65 a barrel, the highest since Sept. 23.
Hedge funds upped their long positions and wagers on rising prices on WTI, the U.S. benchmark, by 2.2% by the end of last week to reach a record 329,100 contracts, according to data from the Commodity Futures Trading Commission (CFTC) and Bloomberg.
The long positions reached the highest level in CFTC data going back to 2006 and have now increased for six straight weeks.
So far, WTI has gained 6.5% in 2014.
Meanwhile, Brent crude, a major European oil benchmark, rose as much as 3% to a two-month high of $112.07 per barrel. This morning in Europe, NYMEX oil prices traded up 1.25% ($1.26) at $103.86 a barrel. The spread between the Brent and U.S. crude contracts stood around $6.91 a barrel.
On Friday, the April contract picked up 0.19% to $102.59 a barrel.
Tensions continued mounting in Ukraine over the weekend. Here's how the conflict is driving U.S. oil futures...
Ukraine Conflict Fueling U.S. Oil Futures
On Sunday, Ukrainian Prime Minister Arseniy Yatsenyuk said his country was "on the brink of disaster" after the Russian parliament approved use of military force in the country.
Russian forces are already on Ukrainian soil. This morning, the Ukrainian State Border Service said that "the pressure from the Russian military" has significantly increased and that Russia is massing armored military vehicles on its side of a narrow sea crossing close to eastern Crimea.
In response, the United States and other major nations are considering imposing sanctions, according to Secretary of State John Kerry on Sunday. U.S. President Barack Obama warned Russia not to intervene, stating that the United States stands by Ukraine.
U.S. oil futures, and crude prices worldwide, are reacting on the definite possibility that Russian President Vladimir Putin could restrict gas supplies, or that there will be an all-out war.
"...if it actually comes to war, U.S. crude could easily surpass $110 and a $120 target is not out of the question," OptionsXpress market analyst Ben Le Brun said to Reuters.
So far, Ukraine has said it is still pumping Russian gas as usual, but regardless of the reassurance, the energy market looks bullish on these events.
"The longer this crisis remains, the greater the impact is going to be on energy expectations in Europe, and we're already seeing that this morning," Money Morning Global Energy Strategist Dr. Kent Moors said on Bloomberg this morning from London.
Watch the video as Moors breaks down the effect of the Ukraine conflict on oil prices.
Simultaneously, back in the United States, cold weather is sweeping the nation once again, contributing to the rise of U.S. oil futures...
Cold Weather's Contribution
Northeast and central United States are once again getting slammed by inclement winter weather, bolstering demand for oil products like heating fuel.
Frigid weather this winter has been responsible for some economic drag, forcing hundreds of thousands of flight cancellations, factories shutting down production, and customers staying home instead of shopping.
U.S. retail sales - which account for 70% of economic activity - unexpectedly fell 0.4% for the month of January according to the Commerce Department. The decline marks the second straight drop after a 0.1% fall in December.
Later today, U.S. economic data is set for release regarding personal spending and manufacturing activity and will provide an updated perspective.
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