Oil Edges Lower Thursday

Oil Edges Lower Thursday

NEW YORK (DTN) -- New York Mercantile Exchange oil futures moved lower after testing resistance, consolidating within the week's trade range with traders weighing data showing domestic crude production continued to decline last week while U.S. crude stockpiles surged to a new high.

At 8 a.m. CT, NYMEX April West Texas Intermediate crude futures fell 31 cents to $34.35 barrel and May Brent crude futures on the IntercontinentalExchange eased 32 cents to $36.61 bbl after inside trade. The NYMEX April ULSD futures contract slipped 0.14 cents to $1.1051 gallon while April RBOB futures fell 1.56 cents to $1.29951 gallon.

On Wall Street, stock indices moved lower, with the dollar index easing to a three-day low from Wednesday's one-month high. The broader market is under pressure after the Labor Department said weekly jobless claims rose 6,000 to 278,000 last week.

For oil traders, the focus remains on supply and demand fundamentals. The Energy Information Administration on Wednesday reported a crude stock build of 10.4 million bbl to 518.0 million bbl for the week-ended Feb. 26, with a year-over-year surplus at 17%. The majority of the crude stock build, 8.7 million bbl, was in the U.S. Gulf Coast.

The data also showed an unexpected 1.2 million bbl crude stock increase to 66.3 million bbl at the Cushing terminal in Oklahoma, the delivery point for NYMEX WTI futures, with working capacity now 90.8% full.

With the U.S. refinery maintenance season approaching, crude inventories are expected to increase further until early spring, said analysts.

However, the fact that U.S. production continued to drop was considered bullish, with the EIA data showing output fell 25,000 barrels per day to 9.08 million bpd. It was the sixth straight weekly decline and analysts said domestic output would continue to fall this year if oil prices don't stabilize.

Also, hopes of limited production among major suppliers have supported the market since last month when Saudi Arabia and Russia announced a tentative agreement to freeze output at January levels on condition other members of the Organization of Petroleum Exporting Countries accept the scheme. Those talks are ongoing with a final deal expected in mid-March, but the impact of such an effort on supply would be limited since those countries are pumping at record levels.

U.S. economic data released Wednesday raised hope for energy demand, with the Federal Reserve's Beige Book showing half a dozen districts across the country reported that economic activity continued to expand at a moderate pace. That followed a strong ADP report showing 214,000 jobs were created in the U.S. economy in February.

The market now awaits the Labor Department's February nonfarm payroll report due on Friday.

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