Oil Down on Ample Supply

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled lower on a stronger dollar and data from the EIA showing an unexpected build in domestic crude oil stocks while oil products data were mixed.

The NYMEX September West Texas Intermediate crude contract was the weakest segment of the futures complex, tumbling to a settlement below $50 bbl for the first time since April 2, after EIA data showed a 2.5 million bbl crude stock build for the week ended July 17.

The market had expected a 2.8 million bbl crude stock draw for the week profiled while the American Petroleum Institute late Tuesday reported an increase of 2.3 million bbl.

NYMEX September WTI crude futures settled down $1.67 to $49.19 bbl, edging off a near four-month low on the spot continuation chart of $49.06. The ICE September Brent crude contract dropped 91 cents to a $56.13 settlement, near a two-week spot low of $55.95 bbl.

The NYMEX August ULSD futures contract settled 0.67 cents lower at $1.6717 gallon, reversing off a one-week high of $1.6865. August RBOB futures also posted a big loss, plummeting 5.33 cents to a $1.8676 gallon settlement and near a four-day low at $1.8600.

The weekly crude supply build lifted U.S. crude inventory to 463.9 million bbl, up 92.8 million bbl or 25.0% year on year. As part of that build, crude stocks at the Cushing, Oklahoma, supply hub that also serves as the delivery point for NYMEX WTI futures, increased 500,000 bbl.

Analysts said a large part of the crude stock build was due to higher imports. EIA showed crude imports rose 587,000 bpd for the week to 7.941 million bpd instead of falling 300,000 bpd as expected.

Weekly crude stocks rose despite a 0.2% increase in refinery runs to 95.5% of capacity nationwide for the week profiled.

EIA also detailed a 1.7 million bbl weekly stock draw for gasoline versus an expected build of 800,000 bbl, while gasoline production jumped 451,000 bpd to 10.109 million bpd, 8.0% higher year on year. Distillate fuel stockpiles edged up 234,000 bbl for the week vs. an expected 2.5 million bbl build.

The EIA report showed strong products demand. It detailed a 346,000 bpd or 3.7% jump in implied gasoline demand to 9.749 million bpd, the highest weekly demand rate since August 2007, while implied demand for distillates spiked 539,000 bpd or 15.6% to a 4.004 million bpd five-week high.

“Refiners are processing the most crude oil since 1982 while imports remain quite robust and the gasoline driving season will be coming to a close in about six weeks,” said Houston-based oil analyst Andy Lipow. “At this time, there is more than adequate inventory to make it thru the driving season.”

On Wall Street, U.S. equities were lower while the U.S. dollar edged higher from a one-week low. A stronger dollar is bearish for oil futures.

The dollar has strengthened since Federal Reserve Chair Janet Yellen said the central bank would likely raise the federal funds rate later this year from near zero.

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