Crudes Soften on US Stock Build

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange mostly softened on an unexpected increase in U.S. crude stocks. Meanwhile the gasoline contract gained more than 2 cents to a one-week high on a slightly larger-than-expected inventory drawdown.

The supply report joined by lackluster gains in U.S. employment and a steep drop in the service sector growth rate in March held oil futures in check, with both the West Texas Intermediate and Brent contracts stalling at five-month highs.

Nymex May WTI futures hit an intraday low at $62.07 per barrel (bbl) in the immediate reaction to weekly supply data released by the Energy Information Administration showing an unexpected 7.2 million bbl build in commercial crude supply in the United States, and registered the session's low about an hour later at $62.05 bbl. The 7.2 million bbl build was the second largest of the year, with the weekly change in crude stocks whether building or drawn down at or greater than 7 million bbl five times this year.

The volatility has much to do with growing crude exports that have averaged 2.74 million bpd in the first quarter, up 1.2 million bpd from the first quarter 2018. For the final week of March, 2.7 million bbl of the weekly build in crude stocks is due to an increase in the net crude import rate at 4.04 million barrels per day (bpd) because of a decline in exports for a second week.

Another 700,000 bbl of the crude build is from a 100,000 bpd increase in U.S. crude production to a new record high at 12.2 million bpd. The U.S. refinery run rate was flat near a six-week low at 15.849 million bpd. Domestic crude stocks should move into a downtrend in May following the completion of seasonal refinery maintenance.

Sluggish macroeconomic data also kept the bulls at bay, who needed a fresh catalyst to push prices through the next round of resistance points after both WTI and Brent topped their 200-day moving averages.

Instead, ADP estimated private payrolls expanded by 129,000 in March that was well below consensus for 165,000 new jobs to have been created. The Department of Labor releases its nonfarm employment report Friday morning, with expectations employment in March grew by 170,000 following an unexpectedly small 20,000 new jobs in February.

The Institute for Supply Management's non-manufacturing index tumbled a more than expected 3.6 to 56.1 for March, taking the steam out of rallying equities with major indices remaining positive in late trade.

Nymex May WTI futures reversed off a $62.99 five-month high on the spot continuation chart to settle down $0.12 at $62.46 bbl. ICE June Brent rallied to a $69.96 five-month spot high overnight, although reversed down $0.06 with a $69.31 bbl settlement.

Oil products were lent support from continued inventory drawdowns that lowered stocks to 14-week lows. At settlement, Nymex May RBOB futures were up 2.27 cents at $1.9512 gallon, and May ULSD futures eased 0.21 cents to $2.0068 gallon.

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

(BAS)

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