Oil Ends the Day Lower on Weak Demand

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended lower Wednesday afternoon after a government report suggested demand for crude is falling as refineries begin their autumn maintenance, with lower equities and a stronger dollar also weighing on the oil futures market.

“Oil [futures] is off with the stock market, but also the Energy Information Administration’s data was not as bullish as the data we saw Tuesday from the American Petroleum Institute,” said analyst Phil Flynn at Price Futures Group. “The focus is now on demand... the fact that refinery runs are sharply down prompted profit-taking.”

Kyle Cooper, a Houston-based analyst at IAF Advisors, said the oil market was driven more by equities and the dollar than by the EIA report, which was considered mildly bullish.

“U.S. oil production was up 20,000 bpd but only in Alaska while Lower 48 oil production was flat,” Cooper said.

Other analysts said the EIA data showing an increase in gasoline inventories offset the smaller than expected draw for domestic crude oil supply. Also, Colonial Pipeline fixed an outage at its line that had boosted refined products on Tuesday, retracing those short-covering gains.

At settlement, NYMEX November WTI crude futures were down $1.88 at $44.48 barrel after trading between a four-day spot high of $47.15 and a one-week spot low of $44.41.

The ICE November Brent crude oil futures contract settled down $1.33 at $47.75 bbl.

NYMEX October ULSD futures reversed lower from a better than one-week high of $1.5780 to settle down 2.64 cents at $1.5056 gallon. NYMEX October RBOB futures fell 3.48 cents to $1.3816 gallon at settlement, off a near two-week high of $1.4531.

On Wall Street, U.S. equities moved lower on risk-on trade after another set of data showed manufacturing activity stayed at a two-year low in September while China’s manufacturing sector fell to a 6-1/2 year low. The dollar index rose to a one-month high before weakening late day.

The market is sensitive to China’s macroeconomic data since a large amount of the growth in global oil demand is predicated on strong economic growth in China, the world's second largest economic power.

On fundamentals, EIA's Weekly Petroleum Status Report for the week-ended Sept. 18 showed crude oil stocks fell 1.93 million bbl versus an expected 2.2 million bbl decline the market expected while API late Tuesday reported a 3.7 million bbl crude stock draw.

Crude stocks at the Cushing, Oklahoma, supply hub that serves as the delivery point for NYMEX WTI futures fell 462,000 bbl, nearly matching an expected 500,000 bbl draw. Crude imports fell 13,000 barrel per day for the week. EIA's products data showed gasoline stocks up 1.369 million bbl versus a 700,000 bbl draw the market expected but lower than API's data showing a 2.2 million bbl increase.

Distillate stocks were unexpectedly drawn down 2.09 million bbl last week versus forecast showing a 1.0 million bbl increase while API reported stocks unchanged at the prior week's level. Demand for gasoline rose 232,000 bpd for the week while distillate stocks climbed 840,000 bpd.

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