Oil Lower on Bearish Weekly EIA Supply

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled lower Wednesday afternoon after traders booked profits from Tuesday’s rally, falling Wednesday on the back of weekly data from the Energy Information Administration detailing bigger-than-expected builds for crude oil and gasoline stocks in the United States while demand eased for crude and gasoline.

“The EIA numbers were definitely different from data [issued Tuesday] by the American Petroleum Institute and that caught the market by surprise,” said analyst Phil Flynn at Price Futures Group. “There was a big buildup in crude stocks at the Gulf Coast and a small surprise increase at Cushing, Oklahoma, that caused concerns.”

The EIA's data also showed a larger-than-expected build for gasoline stocks and a steeper-than-expected draw for distillate stocks for last week. The data is bearish compared with the API statistics that showed an unexpected crude stock draw and a better-than-expected stock decline for distillates for the week-ended Oct. 2.

NYMEX November West Texas Intermediate crude futures settled 72 cents lower at $47.81 barrel, reversing off a 2-1/2 month spot high of $49.71. The ICE November Brent crude futures contract settled 59 cents lower at $51.33 bbl, reversing off a five-week spot high of $53.15.

NYMEX November ULSD futures tumbled 3.19 cents to $1.5796 gallon, moving off a fresh one-month spot high of $1.6344. NYMEX November RBOB futures plunged 4.62 cents to $1.3900 gallon, reversing lower after posting a fresh two-week spot high of $1.4488.

On Wall Street, U.S. stock indices made a decisive move higher after shaking off early weakness, while the dollar dropped to a three-day low amid hope the U.S. Federal Reserve will delay raising short-term interest rates given recent weak jobs and service sector data.

The key issues driving the market today were supply and demand fundamentals. EIA's weekly oil report detailed a 3.1 million bbl commercial crude stock build, doubling expectations for a 1.5 million bbl increase and is bearish versus the API's report Tuesday showing a 1.23 million bbl stock draw.

On products, EIA reported a gasoline stock build of 1.9 million bbl, which is higher than forecast for a 500,000 bbl stock increase, but lower than API's data showing a 4.943 million bbl stock spike for the fuel.

EIA also showed a 2.5 million bbl stock-draw for distillates, which sits between expectations for a 1.0 million bbl decline and API's data showing a 2.9 million bbl stock drop.

On demand side of the ledger, refiner crude intake, a proxy for crude demand, plummeted 403,000 bpd for the week, in part because of seasonal maintenance, with refinery runs down 2.3% to 87.5% of nationwide operable capacity.

Implied demand for gasoline also eased 63,000 barrels per day, although distillate demand jumped 429,000 bpd, suggesting consumers in the Northeast are getting ready for the winter heating season.

On Tuesday, the EIA's October Short-term Energy Outlook revised higher the federal agency's global oil demand estimates while projecting a decline in domestic oil production. The STEO report raised its global demand outlook for this year by 170,000 bpd and for next year by 269,000 bpd.

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