Oil Futures End at 1 1/2-Week Lows

WASHINGTON (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Brent crude on the Intercontinental Exchange settled at 1-1/2 week lows Wednesday afternoon, pressured by bearish weekly supply data released midmorning by the Energy Information Administration.

NYMEX July West Texas Intermediate futures were down more than $2 per barrel (bbl) and oil products more than 5 cents per gallon following EIA's supply report showing across the board inventory builds and an increase in U.S. crude production for the week ended May 17.

An unexpected 4.7 million bbl build in commercial crude stocks in the United States followed a 5.4 million bbl week prior, lifting inventory to a nearly 22-month high at 476.8 million bbl, 39.7 million bbl or 8.8% more than year prior. Domestic crude production also increased 100,000 barrels per day (bpd) to 12.2 million bpd, holding just below record output at 12.3 million bpd in April.

Building U.S. inventory is offsetting production cuts by Organization of the Petroleum Exporting Countries, which signaled this weekend the likelihood OPEC would extend its six-month production agreement through year-end. Growing U.S. inventories are also countering an expanded geopolitical risk premium in oil prices amid heated rhetoric between the United States and Iran, albeit Washington and Tehran have dialed back tensions this week.

Brent's premium to WTI futures increased to a $9.57 bbl one-week high, with last week's $9.75 bbl premium a two-month high.

WTI futures were also under pressure during Wednesday's session on a stronger U.S. dollar, which held just below Tuesday's 97.975 nearly four-week high in index trading, with the late April 98.085 trade a nearly one-year high. The dollar eased following the afternoon release of minutes from the most recent Federal Open Market Committee meeting that offered no surprises, indicating no change in the key federal funds rate is expected this year.

The Dow Jones Industrial Average and S&P 500 Index pared losses following the release of the minutes, but remain down in late trading.

NYMEX July WTI futures settled down $1.71 at $61.42 bbl, although held above support at $60.92 with a $61.03 intraday low. ICE July Brent also moved off support at $70.55 after trading at a $70.42 low, settling down $1.37 at $70.99 bbl.

EIA data on oil products was also bearish, with gasoline inventories narrowing a decline against year ago while distillate stocks widened a year-on-year surplus.

EIA reported an unexpected 3.7 million bbl build in gasoline inventories to 228.7 million bbl that reduced a year-on-year deficit by 1.8 million bbl to 5.2 million bbl or 2.2%. An 800,000 bbl distillate stock increase countered expectations for a draw, and at 126.4 million bbl boosted stocks to 12.4 million bbl or 10.9% above the comparable year-ago period.

NYMEX June RBOB futures settled down 2.81 cents at $1.9912 gallon, and at near parity with the $1.9907 50-day moving average, paring a loss to $1.9640 gallon. NYMEX June ULSD futures settled down 3.03 cents at $2.0491 gallon after trading at a $2.0282 intraday low, finding retracement support at $2.0313 gallon.

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

(BAS)

Copyright 2019 DTN/The Progressive Farmer. All rights reserved.