RBOB Leads Oil Futures Rebound

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended higher across the board Wednesday afternoon with RBOB leading a rebound for the oil complex on the back of weekly data from the Energy Information Administration showing strong product demand.

"The demand data for products and especially for gasoline was very strong and then we had the American Railroad Association coming up with a report showing their carloads have dropped dramatically, a sign that U.S. and Canadian crude oil production is falling," said senior analyst Phil Flynn at Price Futures in Chicago.

He said most of those railcars carry oil produced in North Dakota and western Canada, so a change in shipment volume is one of the indicators of domestic oil output.

The EIA data for the week ended Feb. 19 was mixed however, showing a build in domestic crude oil stocks, but gasoline stocks were drawn down more than expected and implied demand for gasoline and distillates rose sharply during the week ended Feb. 19.

The EIA data for crude was bullish compared to data released late Tuesday by the American Petroleum Institute.

NYMEX April West Texas Intermediate crude futures settled 28cts higher at $32.15 bbl, and April Brent crude oil futures on the IntercontinentalExchange rallied $1.14 to a $34.41 bbl settlement. Brent's premium over WTI widened 86cts to $2.26 bbl, boosted by record high inventory at the Cushing supply hub, the delivery location for NYMEX WTI futures. EIA showed crude supply at Cushing increased 400,000 bbl to a new record at 65.1 million bbl last week, roughly 89.2% of working capacity at Cushing.

The NYMEX March ULSD futures contract jumped 3.73cts to $1.0594 gallon at settlement, rebounding from a 1-1/2 week low of $1.0005. March RBOB futures spiked 4.41cts to a $1.0104 gallon settlement after trading between a three-day low at $0.9463 and a two-day high of $1.0190.

On Wall Street, U.S. stock indices reversed higher this afternoon, tracking gains for oil futures despite weak U.S. economic data. In currency trade, the dollar was little changed late afternoon, vacillating near a three-week high versus its major peers. The sterling pound fell to the lowest level since 2009 on concern over a possible British exit from the European Union.

EIA reported U.S. crude stockpiles increased 3.5 million bbl last week, which is higher than the expected 2.2 million bbl build, and crude inputs, a proxy for demand, fell 163,000 bpd for the week. U.S. oil production fell again, down 20,000 bpd to 9.1 million bpd and down 180,000 bpd year over year.

For products, EIA showed a 2.2 million bbl gasoline stock draw, which is more than an expected 1.5 million bbl stock decline. Distillate fuel stocks fell 1.7 million bbl, less than an expected 2.7 million bbl draw.

Demand was up for products, the data showed, with gasoline demand up 373,000 bpd for the week and distillate demand increased by 222,000 bpd. Implied gasoline at 9.576 million bpd was the highest since mid-August 2015.

The API late Tuesday reported crude stocks soared 7.1 million bbl, gasoline stocks rose 600,000 bbl and distillate stocks fell 300,000 bbl for the week reviewed, which weighed on oil futures early in the session.

NYMEX oil futures were also pressured overnight after Saudi Arabian Oil Minister Ali al-Naimi rejected a call to cut production while endorsing a freeze in oil output at January levels as per last week's tentative deal with Russia, conditioned on other members of the Organization of Petroleum Exporting Countries joining in.

George Orwel, 1.718.522.3969, george.orwel@dtn.com, www.schneider-electric.com. (c) 2016 Schneider Electric. All rights reserved.