NEW YORK (DTN) -- New York Mercantile Exchange crude futures retreated under selling pressure from a combination of a stronger U.S. dollar, renewed concerns about a glut of supply domestically and overseas after federal data showed rising weekly refined products stocks while Iran is expected to flood markets with more oil after signing a nuclear deal Tuesday with six world powers.
The dollar rose after U.S. Federal Reserve Chair Janet Yellen said interest rates are likely to rise this year because the economy is improving.
The U.S. Energy Information Administration said gasoline and distillate stocks posted builds last week as demand lagged, with crude stocks at the Cushing, Oklahoma, supply hub, which also serves as the delivery point for WTI futures also rebuilding.
The NYMEX August WTI crude oil contract settled down $1.63 at $51.41 bbl, reversing lower after posting a three-day high of $53.04. ICE August Brent fell $1.46 to a $57.05 bbl settlement after inside trade, and ahead of the August contract’s expiration Thursday. Brent’s premium over WTI increased 17 cents to $5.64 bbl.
In products trade, the NYMEX August ULSD contract tumbled 5.6 cents to $1.6693 gallon at settlement, near a 5-1/2 month spot low at $1.6644. The NYMEX August RBOB contract plummeted 7.18 cents to a $1.8589 gallon settlement, near a three-month spot low at $1.8527.
On Wall Street, U.S. equities were slightly lower as the dollar rose to a one-week high versus the euro, with a stronger greenback bearish for oil futures.
EIA's report for the week ended July 10 showed a 4.3 million bbl crude stock draw, missing a projected 3.2 million bbl stock decline, but below the American Petroleum Institute's report showing a whopping 7.3 million bbl stock plunge.
EIA also reported gasoline stocks rose 58,000 bbl while the market projected a build of 250,000 bbl. Distillate fuel stocks climbed 3.8 million bbl, EIA said, surpassing a projected 1.8 million bbl increase.
The Iran nuclear deal debate has moved to Capitol Hill where it got a cold reception from lawmakers. President Barack Obama defended the deal during a midday news conference. The deal considered bearish for oil prices because it would lead to the lifting of sanctions on Iran later this year.
Barclays Bank and other risk management firms estimate Iranian oil exports would increase by 600,000 bpd by the end of 2016 or in 2017 after sanctions are lifted. Iranian officials have said they can double exports within a short time.
According to the U.S. Energy Information Administration, Iran produced 2.8 million bpd of crude oil last year, down from 3.7 million bpd in 2011 when sanctions were imposed on Tehran. Iran exported 1.4 million bpd, down from 2.6 million bpd before the sanctions.
On the economic front, Yellen said economic prospects were good enough for a rate hike this year, with the labor market improving. This follows data released Wednesday that showed the U.S. producer price index rose 0.4% in June month over month, and the central bank’s Beige Book showed growing optimism about the economy.
In China, data showed gross domestic product growth of 7.0% for the second quarter, which dampened the prospect of additional stimulus that pressed down oil and equities values.
George Orwel can be reached at email@example.com
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