CRANBURY, N.J. (DTN) -- Nearest delivered New York Mercantile Exchange oil futures settled the end-week session mixed, with oil products edging higher while the West Texas Intermediate crude contract stumbled to a fresh seven-year low even as the U.S. dollar index weakened.
On the week, all the contracts moved lower, although fractionally by the RBOB contract, as traders anticipate a surge in holiday driving demand when ringing in the New Year.
It was a very eventful week for the oil market, capped by passage of legislation that ends 40-year old restrictions on U.S. crude exports, while Wednesday's announced 0.25% increase in the federal funds rate continued to resonate.
NYMEX January WTI crude futures, which expire Monday afternoon, settled down 22 cents at $34.73 per barrel (bbl) -- a $1.23 discount to the February contract, and near a fresh seven-year low on the spot continuation chart of $34.29 bbl. The contract eased 89 cents from prior Friday, Dec. 11, while plunging $6.92 or 19.9% in December, with the month-to-date selloff sparked by the Organization of Petroleum Exporting Countries' non-decision on production quotas at their Dec. 4 biannual meeting. OPEC production reached a seven-year high in November.
WTI crude futures values continued to be battered as the month wore on by building supply, which has increased in 11 of the past 12 weeks through Dec. 11, with inventory at 490.7 million bbl -- 110.7 million bbl or 29.1% above the comparable year-ago period, per data from the Energy Information Administration.
NYMEX WTI crude futures were looking at a small gain near the lunch hour until oil services firm Baker Hughes, Inc. released their Rig Count report showing 17 rigs were deployed in the United States this week to drill for oil, spurring a decline to the $34.29 bbl low. On Wednesday, EIA showed a 12,000 bpd bump higher in U.S. crude production to 9.176 million bpd during the week-ended Dec. 11, slightly higher than the 9.137 million bpd production rate year prior.
Today's decline by WTI futures came in spite of a weaker U.S. dollar, which rallied to a two-week high Thursday—retracing an early December spike to 12-1/2 year high in index trading, in the wake of Wednesday's announcement by the Federal Reserve to end extraordinary monetary easing by lifting the federal funds rate off zero, where it has sat since December 2008.
The end of U.S. crude oil export restrictions passed today by Congress and expected to be signed into law by the president is not anticipated to spark a flotilla of vessels loaded with U.S. crude for foreign markets explain analysts, who highlighting the global supply glut. Longer term, however, the end of restrictions is expected to benefit the WTI contract against Brent crude.
On Tuesday, Dec. 15, as expectations that the restrictions would be lifted gained currency, Brent crude traded on the IntercontinentalExchange settled with its smallest premium to the WTI contract, $1.10 bbl, since January. The spread again widened, as the Fed rate hike spurred dollar gains that weakened WTI futures.
At settlement, ICE February Brent crude settled down 18 cents at $36.88 bbl, holding above Monday's $36.33 bbl seven-year low on the spot continuation chart. Nearest delivered Brent crude eased $1.05 in value from week prior, while tumbling $7.73 or 21.0% in December.
NYMEX January ULSD futures edged up 0.18 cent with a $1.1071 gallon settlement today, although declined 3.85 cents on the week and freefell 22.98 cents or 20.8% in December. The contract traded at a $1.0874 gallon 11-1/2 year low this week, as mild weather and sluggish industrial output restrain demand and inventory builds. The EIA reported distillate fuel inventory at 154.0 million bbl on Dec. 11 -- the second highest storage level in 2015, and 30.4 million bbl or 25.0% above the comparable year-ago period.
NYMEX January RBOB futures settled up 1.3 cents at $1.2746 gallon, edging 0.69 cents lower on the week while sliding 8.41 cents or 6.6% during December. The contract traded earlier this month near a seven-year low on the spot continuation chart of $1.1956 gallon.
An improving economy, labor market and low retail prices have spurred driving demand in 2015, with gasoline set to register its highest consumption rate since 2008. Demand is seen spiking during end-year holidays, with AAA forecasting 91.3 million Americans will drive 50 miles or more between Dec. 23 and Jan. 3, 2016.
Brian L. Milne can be reached at email@example.com
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