NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled lower this afternoon after erasing early gains amid signs of growing supplies and easing demand outlook.
The relentless selloff drove the spot-month West Texas Intermediate crude oil contract below $30 per barrel (bbl) for the first time since December 2003 ahead of weekly supply data that's expected to show ongoing domestic stock builds for crude oil and products.
With WTI down about 15% in 2016, technical factors were also driving trading.
"There were many traders who wanted oil to go below $30 because they had that as their target and they succeeded, but the market was also weighed down by the bearish Short term Energy Outlook report," said analyst Phil Flynn at Price Futures Group in Chicago.
NYMEX February WTI crude contract settled 97 cents lower at $30.44 bbl, off a fresh 12-year spot low of $29.93 bbl. ICE February Brent futures fell 69 cents to a $30.86 bbl settlement, off a fresh 12-year spot low at $30.34.
In products trade, NYMEX February ULSD futures dropped 2.48 cents to a $0.9901 gallon settlement, off a $0.9837 gallon new 11-1/2 year low on the spot continuation chart. February RBOB futures reversed a rally and tumbled 2.82 cents to a $1.0848 gallon settlement, off a fresh seven-year spot low at $1.0796.
On Wall Street, U.S. stock indices were heading for a higher close this afternoon after a volatile session, with the dollar surging to a three-session high versus major world currencies.
The oil futures complex had been mixed during overnight trade but staged a brief rally this morning when regular trade started in the United States, before reversing lower again.
The brief gain was prompted by a report Nigeria and Venezuela were calling for an emergency summit of the Organization of Petroleum Exporting Countries to rein in production. However, the market began to pare gains after the report of an OPEC meeting was later disputed by the United Arab Emirates.
The selling accelerated when the Energy Information Administration released its Short-term Energy Outlook for January that cut the global oil demand growth rate for 2016 from levels published last month largely due to China's slowing economic growth, while revising up its OPEC production estimate by 200,000 bpd compared to last month's figures.
The STEO report cuts the demand outlook for 2016 by 23,000 bpd from estimates in December, projecting a 1.419 million bpd global consumption growth rate to 95.192 million bpd. For 2017, demand is projected to grow at a 1.42 million bpd rate to 96.612 million bpd.
The forecast for OPEC crude production was increased by 500,000 bpd in 2016, with Iran expected to increase production once international sanctions targeting its oil sector are suspended.
The market now awaits weekly oil supply data. A survey by Schneider Electric of what changes occurred in petroleum inventory in the United States during the first full week of 2016 shows the market expects a 2.25 million bbl build in crude oil stocks. U.S. crude stocks typically increase at the start of a new year.
The survey also shows gasoline stockpiles are estimated to have increased by an average of 3.0 million bbl during the week-ended Jan. 8, while distillate stockpiles are seen up 2.5 million bbl.
The American Petroleum Institute is scheduled to release its supply report to customers at 4:30 PM ET while EIA's oil report is set for release at 10:30 AM ET Wednesday.
George Orwel can be reached at firstname.lastname@example.org
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