Oil Higher in Volatile Trade

NEW YORK (DTN) -- New York Mercantile Exchange oil futures recouped earlier losses and are now up in volatile trade after Energy Information Administration data showed a steep rise in U.S. crude supplies that was countered by a decline in domestic production. EIA also reported a gasoline supply draw that was more than expected and an unexpected increase in distillate fuel stockpiles.

The EIA report was generally as bearish as the data issued Tuesday by the American Petroleum Institute and prompted an immediate decline in futures. However, analysts said oil futures reversed higher as EIA data also showed a continued decline in U.S. oil production.

"U.S. oil production fell another 25,000 barrels per day for the week to 9.08 million bpd and that is bullish," said analyst Kyle Cooper in Houston. "However, most of the other details were bearish."

The gains were also linked to supportive U.S. economic data and hopes that Russia and Organization of Petroleum Exporting Countries would eventually agree to freeze their output at January levels.

Shortly after 10 a.m. CT, NYMEX April West Texas Intermediate crude futures rose 51 cents to $34.91 bbl while May Brent crude oil futures on the IntercontinentalExchange gained 37 cents to $37.18 bbl. NYMEX April ULSD futures rose 2.17 cents to $1.1212 gallon while April RBOB futures were 2.31 cents higher at $1.3266 gallon.

EIA reported at 9:30 a.m. CT that U.S. crude stockpiles soared 10.4 million barrels during the week-ended Feb. 26, surpassing an expected 2.0 million bbl build and in line with the API's data showing a 9.9 million bbl crude stock build. The majority of the crude stock build, 8.7 million bbl, was in the Gulf Coast.

That crude build included an unexpected 1.2 million bbl surge to 66.3 million bbl in crude stocks at Cushing, Oklahoma, the delivery point for NYMEX WTI futures, with working capacity at Cushing now 90.8% full. API reported a 1.8 million bbl stock build at Cushing while the market expected a 200,000 bbl draw.

For products, EIA reported a 1.5 million bbl gasoline stock draw, surpassing a 1.0 million bbl draw the market expected while API reported a 2.7 million bbl increase. EIA also reported a 2.9 million bbl stock build for distillate fuels for the week instead of a 1.8 million bbl draw the market expected while API reported a 2.2 million bbl stock draw. On the demand from, EIA reported huge declines for gasoline and distillates, down 455,000 bpd and 340,000 bpd, respectively.

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