Oil Futures Down After Bearish API Data

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended lower this afternoon after the American Petroleum Institute surprised the market with very bearish weekly data showing domestic crude stockpiles soared nationwide, with supplies at Cushing hub in Oklahoma also building.

The report that showed a seventh straight weekly crude stock build for the first week of November added to already entrenched worries about a supply glut at home and abroad.

It comes as the Chinese economic slowdown raises the prospect of weakening demand while the International Energy Agency said current low oil prices are scuttling investments on new production and that would lead to a tighter market down the road.

Moreover, the Organization of Petroleum Exporting Countries meets Dec. 4 but isn't expected to cut its output quota of 30 million bpd. In fact OPEC output is expected to increase steadily over the coming years, with Iraq and Iran seen pumping more oil to the world market by next year.

"The crude oil market is testing the downside, with WTI leading the way after the AP Institute [data]," said analyst Tim Evans at Citi Futures in New York.

"This is bearish because crude stocks rose despite refiners returning from maintenance and increased runs last week," said Alan Levine, chairman of Powerhouse brokerage in Washington, D.C. "This report will keep the market under pressure."

NYMEX December West Texas Intermediate futures settled $1.28 lower at $42.93 per barrel (bbl), moving off a two-week spot low of $42.62, while the ICE December Brent futures contract dropped $1.63 to $45.81 bbl, off a 2-1/2-month spot low of $45.62.

NYMEX December ULSD futures contract plunged 3.88 cents to $1.4477 gallon, after trading to a two-week spot low of $1.4435. The December RBOB futures contract tumbled 3.24 cents to $1.3294 gallon, off a two-week spot low of $1.3230.

The API report issued late Tuesday showed crude stocks jumped 6.2 million bbl during the week-ended Nov. 6, surpassing the expected 800,000 bbl stock build by a wide margin. The crude stock build occurred despite increased refinery runs rate.

At the Cushing, Oklahoma, supply hub for NYMEX crude oil delivery, crude oil stockpiles posted a massive 2.5 million bbl increase, surprising the market that had expected a 500,000 bbl stock draw. The build was even higher than the 1.8 million bbl reported Monday by Genscape, a data gathering firm.

The market is often sensitive to Cushing inventory levels because it acts as the main storage hub for U.S. benchmark WTI crude.

API also reported a 3.2 million bbl stock draw in gasoline stockpiles that surpassed an expected 300,000 bbl draw and a 500,000 bbl draw in distillate stockpiles that fell short of an expected 1.3 million bbl draw.

The Energy Information Administration is due to issue its corresponding data Thursday morning, with the data delayed by a day because of today's Veteran's Day holiday.

On Tuesday, EIA's Short-Term Energy Outlook report for November raised the global demand outlook for 2015 by 75,000 bpd and for 2016 by 59,000 bpd, amid rising consumption in developed nations. However, the reported added that oil production is expected to decline in the United States and Canada next year.

U.S. crude production for 2016 was lowered by 100,000 bpd to 8.8 million bpd, reflecting lower crude oil prices and rig counts in 2016 than projected in the October STEO. Domestic consumption is expected to grow by an average of 300,000 bpd in 2015 and by 100,000 bpd in 2016.

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