Oil Slumps Amid Easing Demand

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled lower Wednesday afternoon following data from the Energy Information Administration showing easing demand for gasoline and distillates and a sixth straight weekly build for domestic commercial crude oil inventories.

A stronger U.S. dollar and lower equities also weighed on the oil market as risk-averse investors exited the market and accelerated the NYMEX oil futures selloff.

The increase for U.S. crude supplies was in line with market expectations, but the EIA report was considered bearish on products because implied demand for gasoline and distillates fuels declined in the week ended Oct. 30 after recent gains.

The EIA's crude oil data was mixed because refiner inputs, a proxy for crude demand, rose 21,000 barrels per day, but U.S. domestic crude production ramped up 50,000 bpd last week after climbing 20,000 bpd during the week ended Oct. 23.

Moreover, crude stocks at the Cushing hub in Oklahoma that also serves as the delivery point for the NYMEX West Texas Intermediate crude futures contract were drawn down 200,000 barrels for the week, albeit the decline was less than expected.

At settlement, NYMEX December WTI crude futures slumped $1.58 to $46.32 bbl while the ICE December Brent futures contract tumbled $1.96 to $48.58 bbl after inside trade.

In products trade, NYMEX December ULSD futures plummeted 6.25 cents to $1.5035 gallon, reversing off a three-week spot high of $1.5816. The December RBOB futures contract tumbled 5.36 cents to $1.3919 gallon, reversing off a two-month spot high of $1.4714.

On Wall Street U.S. stock indices moved lower across the board while the dollar rallied after U.S. Federal Reserve Chair Janet Yellen said during Congressional testimony Wednesday that there's a possibility for an interest rate hike in December if the economy and the labor market continues to improve, with the October payroll report due on Friday.

In Frankfurt, Germany, European Central Bank Mario Draghi left the door open for further stimulus measures, saying Tuesday that he'll assess the need for action on monetary policy in December. As a result, the euro fell versus the greenback, with the U.S. dollar index rallying to a three-month high Wednesday.

Earlier, the oil futures complex was boosted overnight by temporary pipeline outages on the Colonial system in Atlanta and Houston. Colonial moves oil products from the Gulf Coast to the East Coast, so the news primarily underpinned support for the RBOB contract.

The EIA reported crude stocks increased 2.8 million bbl in the week-ended Oct. 30 as expected, bringing the total crude build for the past six weeks to nearly 29 million bbl. Compared with a year ago, crude stocks are up 27%.

EIA also reported gasoline stocks declined 3.3 million bbl, more than three times expectations while distillate stocks declined 1.3 million bbl that was less than an estimated 2.2 million bbl.

The EIA were also mostly in line with the American Petroleum Institute's data issued late Tuesday, except for distillates which API reported fell by a less-than-expected 200,000 bbl for the week.

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