Oil Makes Gains Despite Supply Build

NEW YORK (DTN) -- New York Mercantile Exchange oil futures continued higher despite data from the Energy Information Administration issued at 9:30 a.m. CDT that showed unexpected and large stock builds for domestic crude oil and gasoline and weak demand for the week ended Sept. 25.

Analysts were mixed on why the market continued its advance, with some pointing to support from a draw in crude stocks at the Cushing supply hub in Oklahoma, which serves as the delivery point for the NYMEX West Texas Intermediate crude futures contract. Others pointed to higher equities and Hurricane Joaquin in the Atlantic Ocean and high seas along the East Coast that could affect the shipment of products.

At 10 a.m. CDT, NYMEX November WTI crude futures were up 22 cents at $45.45 barrel while ICE November Brent crude futures rose 31 cents to $48.54 bbl.

NYMEX October ULSD futures advanced 1.24 cents to $1.5100 gallon while the November contract rose fractionally to $1.5344 gallon. NYMEX October RBOB futures surged 2.28 cents to $1.3860 gallon, while November RBOB gained 1.92 cents to $1.3687 gallon.

NYMEX October products futures contracts are set to expire Wednesday afternoon.

The EIA detailed a 4.0 million bbl build for commercial crude stocks for the week reviewed while the market expected a 200,000 bbl draw. The American Petroleum Institute had reported a 4.6 million bbl stock build late Tuesday.

EIA’s report showed domestic gasoline stocks rose 3.3 million bbl last week, matching API’s report Tuesday, while the market expected a 700,000 bbl draw. EIA reported a 267,000 bbl stock draw for distillates, less than an expected 500,000 bbl decline, while API reported a 170,000 bbl increase.

On demand, the EIA data showed refinery crude inputs, a proxy for crude oil demand, fell 241,000 barrels per day last week, with gasoline demand down 194,000 bpd and distillate demand tumbling 560,000 bpd.

NYMEX crude futures fell immediately after the EIA data came out before again reversing higher. Explaining the oil rally, Houston-based Kyle Cooper pointed to the equities rally on Wall Street, with the Dow Jones Industrial Average posting a 1.3% gain on optimism before the end of the third quarter later Wednesday.

Thomas Finlon, an analyst based in Jupiter, Florida, said the Cushing draw of 1.1 million bbl was the catalyst for the oil rally. David Thompson, another analyst based in Washington, D.C., said the Atlantic storm was one of the main reasons for the rally for the oil complex.

On the geopolitical front, Russia launched air strikes in Syria against the Islamic State, a move that could bring tension with the United States. Russia is supporting President Bashar al-Assad, a leader the U.S. wants to see removed from power.

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