DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange settled Wednesday's session lower, pressuring front-month West Texas Intermediate below $80 per barrel (bbl) amid persistent concerns over sluggish U.S. fuel demand ahead of the summer travel season and reports of the restart of Iraqi oil exports from the semiautonomous region of Kurdistan after nearly a monthlong disruption.

U.S. crude benchmark broke below $80 bbl on Wednesday despite a rather bullish inventory report showing nationwide oil stocks declined by a sizable 4.6 million bbl as refiners picked up run rates following the heaviest maintenance season in five years. Further details of weekly report released midmorning from U.S. Energy Information Administration showed crude oil exports shot up 1.87 million barrels per day (bpd) from 2.7 million bpd reported a prior week, with the previous week's data possibly understated.

Oil stored at Cushing storage tanks in Oklahoma, the delivery point for WTI futures, decreased 1.1 million bbl from the previous week to 32.8 million bbl, the EIA said in its weekly report.

The larger-than-expected crude draw came despite another 1.6 million bbl transfer of oil stored at the nation's Strategic Petroleum Reserve to the commercial side. Similar sales will continue through June, according to the Department of Energy.

The bearish factor in Wednesday's EIA inventory report pressuring the oil complex was a sluggish week for gasoline demand that slid 417,000 bpd to 8.519 million bpd. On a four-week average basis, gasoline supplied to the U.S. market, a measure of demand, is now 4.2% below 2019 levels for the seasonal period. As a result, domestic gasoline stocks rose 1.3 million bbl in the week ending April 14.

With summer travel season quickly approaching, the market is likely to remain laser-focused on transportation demand, and this week's EIA report did not ease concerns that demand remains fragile.

Further pressuring the oil complex, about 450,000 bpd of Iraqi crude oil exports via the Turkish port of Ceyhan are set to resume this week after a three-week standoff between Iraq, the semiautonomous Kurdistan Regional Government, and Turkey.

"Disruptions to global energy supply don't serve anyone's interests," National Security Council spokesman John Kirby told reporters in Washington.

It appears the disagreement has been finally settled after a phone call between U.S. Secretary of State Anthony Blinken and Iraqi Prime Minister Mohammed Shiaa al-Sudani who discussed regional security and energy independence on Tuesday, according to a statement from the State Department.

"The Secretary welcomed the Prime Minister's bold steps toward energy independence and, by extension, improving services for the Iraqi people. He commended the Prime Minister's on-going efforts to reach an agreement between the Government of Iraq and the Kurdistan Regional Government on the export of oil through the Iraq-Turkey Pipeline and management of oil revenues," read the State Department's statement.

Iraqi news outlets reported this morning that crude flow from Kurdistan is set to resume this week. The two sides had already reached a temporary agreement earlier this month, but oil flows had yet to resume. The situation remains fluid.

At settlement, NYMEX May WTI futures declined $1.70 to $79.16 bbl ahead of expiration at Thursday's closing bell, with the June contract finishing at $79.24 bbl. ICE June Brent futures fell $1.65 to $83.12 bbl. NYMEX May RBOB futures dropped back $0.1054 gallon to $2.6455 gallon, continuing a retreat from last week's five-month high of $2.8943. May ULSD futures declined for the fifth consecutive session, falling $0.0422 for a $2.5577 gallon settlement.