Oil Futures Settle Mostly Lower

Oil Futures Settle Mostly Lower

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended mixed with a downside bias, with spot-month West Texas Intermediate eking out a modest gain at the close after volatile trade spurred by mixed industry and federal oil data that caused confusion than clarity, while RBOB and ULSD futures posted new multiyear lows.

On the IntercontinentalExchange, Brent crude with nearest delivery broke below the $30 per barrel (bbl) mark for the first time since February 2004, pressured by expectations Iran would start shipping more crude to the market by February once international sanctions are lifted, and reports Libyan oil supply would be reliable once warring factions form a unity government over the coming weeks or months.

"EIA data broke the upside momentum for NYMEX oil futures because it showed record supply of products," analyst Phil Flynn at Price Futures said. "Libyan officials said they could boost production to 1.2 million bpd."

Oil futures were higher early before taking a leg down in midmorning trade following weekly data from the Energy Information Administration detailing stock builds for domestic crude oil and refined products for the week-ended Jan. 8.

The NYMEX February WTI crude contract settled 4 cents higher at $30.48 bbl after trimming gains from a session high of $31.71. The contract on Tuesday fell to a more than 12-year spot low of $29.93. ICE February Brent futures were down 55 cents at a $30.31 bbl settlement, off a $29.96 new 12-year low on the spot continuation chart.

In products trade, February ULSD futures slumped 2.07 cents to $0.9694 gallon at settlement, off a new 11-1/2 year spot low of $0.9597. The February RBOB futures contract dropped 3.20 cents to a $1.0528 gallon, off a fresh seven-year spot low at $1.0408.

EIA reported a 234,000 bbl crude oil stock build for the first week of 2016, which was less than market expectations for a 2.25 million bbl build but bearish versus the American Petroleum Institute's data that showed a 3.9 million bbl stock draw.

On products, EIA said gasoline stocks soared 8.4 million bbl, more than API's data showing a 7.0 million bbl build and a forecast for a 3.0 million bbl stock build. The nationwide crude stock build included a 100,000 bbl increase at the Cushing supply hub in Oklahoma to 64.0 million bbl—a record high.

Distillate supplies also spiked 6.1 million bbl for the week, nearly twice the 3.67 million bbl reported by the API and more than twice the 2.5 million bbl increase expected by analysts.

Globally, Iran is expected to boost production by as much as 500,000 bpd in February after sanctions are lifted as soon as next week. The United Nation's nuclear watchdog is expected to report on Friday that Iran has complied with the terms of the July 2015 nuclear deal with world powers, setting the stage for the lifting of sanctions by Monday, Bloomberg News reported.

Once sanctions are lifted Iran will be able to access global financial markets and raise oil production and exports, exerting further pressure on an oil market already oversupplied.

Medium to long term, EIA's Short-term Energy Outlook on Tuesday cut its 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.

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