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Monday, March 31, 2014

Crude closes above $101/barrel

Positive economic data boosts prices

Crude oil prices rose further above the $100-a-barrel mark on Thursday, 27 March 2014 at Nymex settling at their highest close in about three weeks, with traders attributing the gains to growing global supply concerns as well as a continued drop in crude inventories at a key U.S. storage hub. A fall in U.S. jobless claims and a rise in the nation's economic growth also buoyed prospects for oil demand. Natural gas, meanwhile, saw prices close their highest level in more than two weeks as U.S. supplies fell more than expected.

Crude oil for May delivery added $1.02, or 1%, to settle at $101.28 a barrel on the New York Mercantile Exchange.

The ICE dollar index, which measures the U.S. currency against a basket of six major rivals, edged higher on Thursday, keeping gains of crude under check.

The Russia-Ukraine tensions have not escalated significantly recently, but the situation remains a concern to the world market place. While the U.S. is leading a worldwide effort to isolate Russia after its annexation of Crimea, reports Thursday said Russian economic growth is set to slow to the weakest rate in years. Meantime, the IMF has agreed to loan Ukraine up to $18 billion to help out that nation's struggling economy, after the Russian incursion.

The markets paid little attention to news late Wednesday that some U.S. and world banks, including Citi, failed a government stress test due to inadequate capital plans. Those banks will have to resubmit new capital plans to the Federal Reserve.

U.S. economic data out Thursday included the weekly jobless claims report, the third-quarter GDP estimate, the Kansas City Fed manufacturing survey, and pending home sales.

In details, Fourth quarter GDP was revised up to 2.6% in the third estimate from 2.4% in the second estimate. That matched the consensus estimate, but was down from a 4.1% gain in Q3 2013. Real final sales increased 2.7% in the fourth quarter. That was up from a 2.5% gain in Q3 2013 and above the previously reported 2.3% gain. It was also the strongest increase in real final sales since increasing 3.4% in Q2 2012. Looking at real final sales over the last four quarters (0.2%, 2.1%, 2.5%, and 2.7%), there is a definite upward moving trend. The year-over-year averages, however, put it below the 2.0% and 2.6% gains from 2011 and 2012.

The initial claims level fell to 311,000 for the week ending 22 March from an upwardly revised 321,000 (from 320,000) for the week ending 15 March. The consensus expected the initial claims level to increase to 330,000. Pending home sales for February fell 0.8%, which was worse than the 0.2% decrease forecast by the consensus. Today's reading followed last month's revised decrease of 0.2% (from +0.1%).

Among other energy products, April gasoline added 3 cents, or 1.2%, to $2.94 a gallon and April heating oil ended at $2.95 a gallon, up almost 3 cents, or 1%.

May natural gas tacked on 14 cents, or 3.3%, to $4.538 per million British thermal units, for the highest close since 11 March, based on the most-active contracts. Prices were trading at around $4.42 before the supply data were released. The EIA reported that supplies of natural gas fell 57 billion cubic feet for the week ended 21 March. Market had forecast a fall of between 50 billion cubic feet and 54 billion cubic feet