CRANBURY, N.J. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Intercontinental Exchange Brent crude registered a second session with gains on bullish fundamentals detailed in weekly data from the Energy Information Administration and an outlook for a tight global oil supply market through the second quarter.
The two features adjoined during the midweek session, and ahead of contract expirations Thursday afternoon that could catch shorts covering positions should Wednesday's advance continue into the final trade session of February.
Ahead of the midmorning supply report Wednesday, Saudi Arabian Energy Minister Khalid al-Falih reaffirmed forward guidance that the kingdom would maintain deep production cuts as it endeavors to reduce global oil inventory, adding Wednesday that a six-month production agreement between the Organization of the Petroleum Exporting Countries, Russia and nine other non-OPEC producers might be extended through year's end.
Earlier this month, al-Falih indicated a March Saudi production rate of 9.8 million barrels per day (bpd), which compares with its allotted 10.311 million bpd output rate under the OPEC+ pact. Unsaid, Saudi is specifically reducing crude exports to the United States—a time-tested strategy in boosting global oil prices since U.S. data is the world's most transparent.
Based on Wednesday's EIA report showing data for the week-ended Feb. 22, the strategy is working, with U.S. crude imports plunging to a 23-year low 5.917 million bpd, down 1.605 million bpd from the previous week.
Lower crude exports from Venezuela to the United States amid U.S. sanctions were also a factor in the steep decline rate, with PADD 3 Gulf Coast crude imports tumbling 842,000 bpd to 1.677 million bpd during the week profiled. During the four weeks ended Feb. 22, PADD 3 crude imports averaged 1.81 million bpd, down 681,000 bpd against the comparable year-ago period.
At 3.359 million bpd U.S. crude exports remain high, too. Combined with a net export rate for oil products at 2.72 million bpd, the United States was a net exporter of oil for the second week on record at 162,000 bpd.
Lower imports and higher exports joined by a 179,000 bpd increase in crude inputs at U.S. refineries to 15.89 million bpd prompted an 8.6 million barrels (bbl) draw in domestic commercial crude stockpiles to a 445.9 million bbl four-week low last week, and sharply narrowed a year-on-year surplus 11.6 million bbl to 22.4 million bbl or 5.3%.
Data was also supportive for gasoline, with a larger-than-expected 1.9 million bbl draw in gasoline stocks to a 254.9 million bbl seven-week low working to narrow a year-on-year supply surplus for the sixth consecutive week to 3.1 million bbl from mid-January's 15.6 million bbl overage.
Implied demand for U.S. oil products at 20.832 million bpd cumulatively through Feb. 22 is 269,000 bpd or 1.3% above year ago, with implied distillate demand accounting for 4.205 million bpd of that total, 91,000 bpd or 2.2% above the comparable year-ago period. Climbing demand for distillate fuel implies a strong U.S. economy.
Implied gasoline demand so far this year is flat with the 2018 pace at this point, up 5,000 bpd at 8.917 million bpd. Tuesday's strong Consumer Sentiment Index reported for February by the Conference Board and a vibrant jobs market suggests strong demand will continue, provided prices don't get too high.
Nymex March RBOB futures spiked to $1.6368 3-1/2 month high on the spot continuous chart ahead of the March contract's expiration Thursday. April RBOB futures settled at a $0.1266-gallon premium to the expiring contract, reflecting gasoline's seasonal uptrend.
Nymex RBOB March futures settled up $0.0477 at $1.6340 gallon, with the April contract settling up $0.0363 at $1.7606 gallon. ULSD March futures settled up $0.0231 at $2.0216 gallon, with April delivery settling up $0.0240 at $2.0221 gallon.
Nymex West Texas Intermediate April futures settled up $1.44 at $56.94 bbl, with the May contract settling up $1.40 at $57.37. ICE April Brent futures settled up $1.18 at $66.39 bbl, with the May contract settling up $1.22 at $66.58 bbl.
Brian L. Milne can be reached at firstname.lastname@example.org
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