Oil Ends Higher on Better Demand

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled higher Thursday afternoon on an improving demand outlook and bullish comments earlier in the day by European Central Bank President Mario Draghi, but oil futures pared gains on a stronger dollar and lingering worries about oversupply.

“Earlier, the market was boosted by the comments about more quantitative easing and then there was flaring at the Juliet refinery that gave the cash market a boost but we gave up some of the gains later because oil inventories are still too high,” said analyst Phil Flynn at Price Futures in Chicago.

He added, “There’s been this tension between supply and demand, and today we are more concerned about demand for gasoline and distillates. The Draghi comments were both bullish and bearish because he talked about concerns about global growth as well stimulus, which is supportive.”

NYMEX December West Texas Intermediate futures settled 18 cents higher at $45.38 barrel while the ICE December Brent crude futures contract settled 23 cents higher at $48.08 bbl.

NYMEX November ULSD futures climbed 1.50 cents to $1.4650 gallon at settlement, off a $1.4769 three-day high. NYMEX November RBOB futures advanced 2.59 cents to $1.3067 gallon, off a three-day high of $1.3194.

On Wall Street, U.S. stock indices rallied Thursday to a nine-week high on risk-on trade, with the dollar rising to a three-week high while the euro fell after Draghi said the ECB was open to having more stimulus.

Wednesday’s Energy Information Administration’s inventory data showed oil and refined product stockpiles still at high levels but demand is improving. EIA reported a 20,000 barrel per day rise in implied gasoline demand and a 201,000 bpd jump for distillates last week. Refinery crude inputs, a proxy for crude demand, rose 78,000 bpd for the week.

Total products supplied over the last four-week period, a better measure for demand, averaged about 19.4 million bpd, up 1.0% from the same period last year, the data showed. Seasonal demand should boost oil prices going forward as refineries returning from autumn maintenance boost run rates, analyst Kyle Cooper at IAF Advisors said.

EIA also showed crude oil stocks posted an 8.0 million bbl build last week after rising 7.6 million bbl during the prior week.

On the economic front, Draghi said some policymakers want more stimulus measures for the euro zone “today,” and ECB was considering lowering bank deposit rates and negative interest rates. Draghi said the slowing growth in China has not affected global growth yet and confidence in the euro-area, adding oil prices have been under pressure in the past year from excess supply rather than demand.

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