Oil Futures Swing to Intra-session Lows

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange nearest delivered oil futures fell to fresh intraday lows following the late morning release Thursday of weekly supply data from the Energy Information Administration, with EIA statistics bullish for crude but bearish for oil products.

A larger-than-expected 7.3 million barrels (bbl) drawdown in commercial crude stocks to 443.2 million bbl for the final week of November was the first inventory decline since mid-September, and was realized despite a 1.0 million bbl draw from the Strategic Petroleum Reserve.

The steep draw occurred as U.S. crude exports surged 761,000 barrels per day (bpd) to a record high 3.203 million bpd, while imports plunged 943,000 bpd to a 7.219 million bpd 8-1/2 month low.

NYMEX January WTI pared earlier losses immediately after the release of the EIA report, but quickly resumed the downside to trade at four-session low at $50.08 bbl.

Implied distillate demand improved 467,000 bpd to 4.037 million bpd, but stocks still increased 3.8 million bbl to 125.6 million bbl. The build was realized as refiners ramped up production to a 5.571 million bpd production rate, an 11-month high and the second highest production rate on record. Distillate imports also surged 250,000 bpd to a 10-month high at 436,000 bpd.

A 1.7 million bbl build in gasoline stocks to 226.3 million bbl was slightly more-than-expected, however implied demand tumbled 311,000 bpd to a nine-month low at 8.877 million bpd. U.S. gasoline imports did drop 195,000 bpd to an 189,000 bpd 23-year low.

Nymex January WTI futures were down $2.10 near $50.80 bbl at the noon hour in New York, with January ULSD futures 5.5 cents lower near $1.8340 gallon. Nymex January RBOB futures were down 3.85 cents near $1.4075 gallon after trading at a fresh two-year low on the spot continuation chart of $1.3748 gallon.

Oil futures were already under heavy selling pressure as oil ministers with the Organization of the Petroleum Exporting Countries meet in Vienna to discuss production rates. Saudi Arabia proposed a smaller-than-expected 1.0 million bpd production cut for next year, with the market anticipating a 1.3 million bpd output reduction. The Saudis also said all parties with OPEC and 10 non-OPEC oil producing countries led by Russia cooperating in an output accord would need to participate or there would be no deal.

OPEC will meet with the non-OPEC contingent on Friday. There's no guarantee a deal will be reached, with Russian oil companies pressing Russian President Vladimir Putin to not agree to reducing output.

Oil futures are also down on heavy selling in equities following Tuesday's rout, with stock exchanges closed Wednesday for a National Day of Mourning for President H.W. Bush. The selloff in equities is in response to concerns a U.S./China truce in their trade dispute reached on Saturday (12/1) will unravel. Thursday's trigger for the selloff was the arrest of a Huawei executive and daughter of the Chinese company's founder in Canada at the request of the United States.

Huawei has been watched closely by the United States and western nations for its ties with the Chinese government, and concern the technology company could be used for spying.

The arrest could quickly end the truce between the United States and China, and escalate a trade dispute between the world's top two economies.

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

(BAS)

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