DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange fell early Thursday on a stronger U.S. dollar and despite an inventory report from the U.S. Energy Information Administration showing a 12.5-million-barrel (bbl) drop in commercial crude oil inventories during the third week of May.

Thursday's move lower in the oil complex follows the latest EIA inventory report showing an outsized draw in commercial crude oil inventories last week despite another transfer of crude from the Strategic Petroleum Reserve to the commercial side and a rise in domestic oil production. At 455.2 million bbl, U.S. commercial oil inventories now stand 3% below the five-year average. The draw came even as domestic refiners scaled back run rates to 91.7%, processing 16.1 million barrels per day (bpd) -- which was roughly the same level compared to last week.

In the gasoline complex, demand for motor fuels jumped 529,000 bpd from the previous week to 9.437 million bpd -- the second highest weekly rate so far this year, according to the EIA. Gains for gasoline demand come ahead of the Memorial Day weekend that typically marks the beginning of the busy summer travel season. The American Automobile Association projects 42.3 million Americans will take to the road this Memorial Day weekend, a 2.7 million or 7% increase from a year earlier. If realized, it would be the third busiest travel level for the holiday, with AAA beginning its holiday travel outlook in 2000. "More Americans are planning trips and booking them earlier, despite inflation. This summer travel season could be one for the record books, especially at airports," said Paula Twidale, senior vice president of AAA Travel.

Commercial gasoline inventories declined by 2.1 million bbl in the reviewed week and are about 8% below the five-year average. Earlier in the week, analysts projected gasoline stocks would decline by 1.3 million bbl.

For diesel, stockpiles fell by 561,000 bbl to 105.7 million bbl, and are now about 18% below the five-year average, the EIA said. Analysts estimated middle distillate inventories would rise by 300,000 bbl last week.

Near 7:30 a.m. EDT, WTI futures for July delivery declined $1.44 to 72.89 bbl, and ICE July Brent, the international crude benchmark, fell to $76.95 bbl, down by $1.40 bbl. NYMEX June RBOB futures were $0.0525 lower at $2.5994 gallon, while ULSD June futures declined $0.0388 to $2.3749 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com .