NYMEX WTI Futures Settle at 2-Week High

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended sharply higher this afternoon, with West Texas Intermediate crude settling at the highest level since Aug. 31, after the Energy Information Administration reported a bigger weekly domestic crude oil stock draw than the market expected.

The biggest support for WTI was that crude oil stocks at the Cushing, Oklahoma, supply hub that also serves as the delivery point for the NYMEX-traded U.S. benchmark crude contract decreased 1.906 million barrels (bbl) to 54.5 million bbl, surpassing a 300,000 bbl draw the market expected and the 1.5 million bbl draw reported late Tuesday by the American Petroleum institute.

"We saw another big draw at Cushing, which shows U.S. production is falling more than anticipated while demand by refineries is still rising," said Chicago-based analyst Phil Flynn at Price Futures Group. "The market was also oversold a few weeks ago, and we've seen companies cutting their capex, which means crude production will continue to fall."

He added, "People also believe the Federal Reserve won't raise interest rates tomorrow, but even if they do, a rate hike may be bearish only in the short term because in the long term it shows the Fed has confidence in the economy, which is good for demand."

NYMEX October WTI crude futures settled $2.56 or 5.7% higher at $47.15 bbl, moving off a better than one-week spot high of $47.35. ICE November Brent climbed $2.00 or 4.3% to $49.75 bbl, off a better than a one-week spot high of $50.34.

NYMEX October ULSD futures climbed 4.14 cents or roughly 3.0% to $1.5414 gallon at settlement, off a three-day high of $1.5638. NYMEX October RBOB futures spiked 4.92 cents or 3.7% to $1.3821 gallon at settlement, near a one-week high of $1.4074.

On Wall Street, U.S. equities turned higher as the dollar reversed off a four-day high in anticipation the federal funds rate would remain unchanged when the Fed makes its announcement Thursday afternoon.

The main price action was driven by fundamentals, however. EIA's data for the week-ended Sept. 11 detailed a 2.1 million bbl crude oil stock draw versus a survey that indicated the market anticipated a 1.0 million bbl decline. API reported a 3.1 million bbl draw.

At Cushing, crude stocks were drawn down 1.9 million bbl to 54.5 million bbl, more than an API-reported 1.5 million bbl decline and well above a 300,000 bbl draw estimated by the market.

While the crude data was bullish, refined products data were bearish. EIA said gasoline stockpiles increased 2.8 million bbl last week while the market expected gasoline supplies to hold steady and API reported a 500,000 bbl build.

For distillates, EIA reported a 3.1 million bbl build, surpassing the API report showing a 3.0 million bbl rise and expectations for a 1.2 million bbl increase. Demand for both gasoline and distillate eased for the week.

The oil futures market was also boosted by a weakening dollar, with the greenback reversing off a four-day high after new data showed a lack of inflation. Earlier today, the Bureau of Labor Statistics issued data showing the Consumer Price Index fell 0.1% in August. Analysts said the Fed would take the weak CPI data into account when deciding whether to raise interest rates, which hasn't happened in nine years.

Fed Vice Chairman Stanley Fisher said last month that since the U.S. is at what's considered full-employment, the decision to raise rates will depend on whether inflation is moving towards a 2.0% target. The CPI data shows the opposite is occurring.

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