Oil Settles Mixed on EIA Supply Data

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled mixed Wednesday afternoon after a rollercoaster trade session, as traders weighed a bearish weekly oil report against dovish U.S. Federal Reserve comments that pressured the dollar by reaffirming the central bank’s current easy money policy.

“The market was bullish heading into the EIA report because the API showed strong demand, but then the EIA data was disappointing, showing demand down, so we sold hard,” said Phil Flynn, a senior analyst at Price Futures Group in Chicago. “But because the Fed didn’t raise rates and said that they will look at international developments, oil traders took that to mean they won’t raise rates, so oil futures rose off lows for the session.”

At settlement, NYMEX July WTI crude futures were 5cts lower at $59.92 bbl after reversing off a four-day high of $61.38 and bouncing off a two-day low of $58.85. The ICE August Brent contract settled 17 cents higher at $63.87 bbl after paring gains following an early rally to a four-day spot high of $65.47.

NYMEX July ULSD futures settled up 2.49 cents to $1.9098 bbl, paring gains after posting four-day high of $1.9488. NYMEX July RBOB futures declined 2.40 cents to a $2.1005 gallon settlement, having reversed from a 7-1/2 month spot high of $2.1858 and bouncing off a one-week low of $2.0726.

The oil complex was off to a strong start, rallying early on the back of a bullish weekly supply report issued late Tuesday by the American Petroleum Institute. But prices fell at around midday after the Energy Information Administration reported an unexpected build in gasoline stocks and a sizable build in crude oil stocks at the Cushing, Oklahoma, supply hub that is also the delivery location for the NYMEX WTI futures contract.

The EIA report for the week ended June 12 showed Cushing crude stocks climbed 100,000 bbl, the first increase in the past eight weeks, with the latest data bearish for WTI crude prices. The report also showed nationwide crude stocks declined 2.7 million bbl, surpassing an expected 1.8 million bbl draw though less than a 2.9 million bbl stock decline reported by the API late Tuesday.

EIA's report also showed gasoline stockpiles unexpectedly increased 460,000 bbl as demand fell 294,000 bpd for the week, while the market expected stocks to hold steady. Distillate supplies rose 113,000 bbl for the week, falling short of an expected 700,000 bbl stock build. The EIA reported refinery crude inputs as well as refinery runs both fell last week, suggesting a decline in crude demand.

During market-at-close trade, oil futures moved mixed after the dollar index reversed lower following the release of the Federal Open Market Committee’s policy statement at 1 p.m. CDT. The FOMC’s statement kept federal funds rate target at current zero to 0.25%. Oil and the dollar often trade inverse to each other, with a weaker greenback bullish for oil prices.

The decision to raise rates will depend on economic conditions, including labor market conditions, inflation pressures and expectations and readings of international developments, the statement said.

Fed Chair Janet Yellen reiterated those policy goals in her subsequent news conference saying there has been “overblown” attention on the timing of the first rate hike, adding that the accommodative policy will remain for some time. She said what should matter is the trajectory of the rate hike, which will be gradual.

The Fed believes the economy is expanding at a moderate rate and the labor market is picking up, but downgraded its forecast for gross domestic product for 2015 to a 1.8% to 2.0% range from prior estimate of a 2.3% to 2.7% range. Investors had been looking for clues as to when the central bank would hike the federal funds rate and views on the nation’s economic health.

Oil traders are also keeping a watchful eye on downgraded Tropical Storm Bill, which has brought heavy rainfall and flash floods to Texas and Oklahoma, where there are refineries and other oil facilities.

George Orwel can be reached at george.orwel@telventdtn.com