NYMEX Oil Shakes Off Early Weakness

CRANBURY, N.J. (DTN) -- Oil futures traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled mixed. This came after slumping to two-week lows in early trading, paring losses alongside a reversal by major equity indices and on a mostly bullish slate of supply data released midmorning that included record high U.S. crude oil exports.

Oil futures tumbled in early trading on the announcement by China that it would impose sanctions on 106 U.S. products imported into the nation, stating that the tariffs are in response to the Trump administration's announcement on Tuesday that the United States would impose tariffs on $50 billion of Chinese imports, which targeted appliances, machinery and automation.

The tit-for-tat exchange heightened concern that a trade war was developing between the world's two largest economies that could upend economic growth and limit demand for oil.

After beginning the second quarter on Monday with steep losses, major equity indices rallied Tuesday only to selloff again early today in reaction to the latest trade action—the fourth between the two nations. By afternoon, equity markets had largely shrugged off a doom-and-gloom sentiment to reverse higher, with the Dow Jones Industrial Average up more than 250 points late afternoon and the S&P 500 Index gaining nearly 35 points.

The reversal in equities was joined by mostly supportive data on supply and demand released midmorning by the Energy Information Administration to walk back steep morning losses, with West Texas Intermediate and Brent crude settling with modest declines while RBOB futures posted a fractional gain. ULSD futures held in the red, with weekly data for distillates bearish.

At settlement, NYMEX May WTI futures were down 14cts at $63.37 bbl, cutting a loss to a $62.06 bbl new two-week spot low. ICE June Brent futures slipped 10cts with a $68.02 bbl settlement, paring a loss to a $66.69 bbl fresh two-week spot low.

NYMEX May RBOB futures reversed from a $1.9363 gallon two-week spot low to settle up 0.27cts at $1.9768 gallon, while the May ULSD contract settled down 1.77cts at $1.9773 gallon after trading at a new two-week spot low of $1.9521 gallon.

EIA reported a 4.6 million bbl draw from U.S. commercial crude stocks for the week-ended March 30 that compared with estimates for inventory to stay flat. At 425.3 million bbl, commercial crude stocks are below the five-year average for a third consecutive week.

The supply draw came amid a record high rate of U.S. crude exports at 2.175 million bpd in ending the first quarter, with the weekly export rate above 2.0 million bpd for only the third time since restrictions on U.S. crude exports were lifted in December 2015.

U.S. crude production did increase to a fresh record high, up 27,000 bpd to 10.46 million bpd, with output up 968,000 bpd in the first quarter. In addition to strong exports, U.S. refinery crude inputs at 16.936 million bpd were the most since the first week of the year, with crude inputs consistently holding above the year-ago period during the first three months of 2018.

RBOB futures were lent upside support after EIA reported a 1.1 million bbl draw in gasoline inventory that was modestly less than expected, but bullish compared with a 1.2 million bbl build reported Tuesday afternoon by the American Petroleum Institute.

Weekly EIA data was bearish for ULSD futures, with Beltway analysts reporting a 500,000 bbl build in distillate supply for last week compared with expectations for a 2.5 million bbl draw, although less than an API reported 2.2 million bbl build. Implied distillate demand tumbled 487,000 bpd during the last week of March to 3.887 million bpd, although averaged 4.064 million bpd in the first quarter that outpaced the year ago quarter by 2.2%.

Brian L. Milne can be reached at brian.milne@dtn.com

(BE)

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