Oil Futures Lower on Crude Stock Build

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended sharply lower this afternoon after a mixed set of weekly oil data from the Energy Information Administration and uncertainty surrounding the default by Greece on its debt to the International Monetary Fund triggered selling pressure.

The EIA report for the week-ended June 26 detailed the first crude oil stock build in nine consecutive weeks, surprising most traders who expected crude stocks to have been drawn down by an average of 200,000 bbl.

"The market shouldn't have been surprised by the crude stock draw if you [considered] the storm effect a week ago stopped imports from coming in to the Gulf Coast," said analyst Phil Flynn at Price Futures. "To me this was a bullish report if you look at the demand side of the equation. However, what we have here is that the Greece situation is dampening expectations for economic growth and demand growth. The dark cloud hanging over Greece is what kept people from looking at demand data in today's report."

He added, "A stronger U.S. dollar and the strong jobs report are also bearish for oil futures."

NYMEX August West Texas Intermediate crude contract tumbled $2.51 to $56.96 bbl at settlement, with the contract posting a one-month spot low of $56.68 after the close of regular trade.

ICE August Brent crude futures tumbled $1.58 to a $62.01 bbl settlement after inside trade, with the Brent premium over WTI expanding by 93 cents to $5.05 bbl at the close, the widest premium in one month.

In products trade, the NYMEX August ULSD contract took a 5.06 cents dive to a $1.8393 gallon settlement, near a two-day low at $1.8316. The NYMEX August RBOB contract dropped 4.26 cents to a $2.0068 gallon settlement, off a one-month spot low of $1.9985.

On Wall Street, U.S. equities rose on U.S. economic optimism, with payroll firm ADP reporting today that 237,000 private sector jobs were created in June, more than an expected 230,000. The Labor Department's jobs report for June will be issued Thursday.

The Institute for Supply Management said its manufacturing index rose to 53.5 in June from 52.8 in May, the biggest increase in five months, and above the 53.2 forecast. Data issued Tuesday showed a rise for home prices, manufacturing and consumer confidence.

EIA showed crude stocks posted a 2.4 million bbl build last week versus an expected 200,000 bbl stock draw and surpassing a 1.9 million bbl crude stock build reported late Tuesday by the American Petroleum Institute. At the Cushing, Oklahoma, supply terminal which also serves as the delivery point for NYMEX WTI crude, supplies rose 100,000 bbl for the week.

On products, EIA reported gasoline stocks were drawn down 1.8 million bbl instead of a 300,000 bbl stock build reported by API while analysts' forecast a 2.0 million bbl stock build. Distillate stocks rose by 392,000 bbl, said EIA, versus an expected build of 1.8 million bbl. API reported a 300,000 bbl stock build for the fuel.

EIA's data on demand was bullish however, showing implied gasoline demand up 76,000 bpd while distillate implied demand soared 296,000 bpd for the week.

Aside from supply data, the market is also keeping a watchful eye on the Greek debt crisis and ongoing Iran nuclear talks.

Greek Prime Minister Alexis Tsipras addressed his nation today, renewing his commitment for a June 5 referendum on the cuts demanded to receive a financial rescue from creditors. His latest comments confused many because he seemed to have backed down in the standoff with creditors earlier when he sent a letter to creditors overnight accepting a June 28 bailout proposal they offered which he had previously rejected. However, German Chancellor Angela Merkel quickly rejected his overture, saying it was too late and all talks are frozen until after the referendum.

Banks in Greece remained closed for the third day as the country is cut off from financial markets, with no way to get funds after becoming the first developed country to default on its debt to the IMF.

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