Oil Extends its Rally in Midday Trade

NEW YORK (DTN) -- New York Mercantile Exchange oil futures extended a rally in midmorning trade Wednesday after the Energy Information Administration reported draws for weekly domestic refined products and growth in implied demand for crude and products.

The EIA's report dovetails the American Petroleum Institute's report, which was issued late Tuesday and showed a draw for products while crude supplies continued higher.

The market is focused on products because of the upcoming transition to the gasoline season, which partly explains why spot-month RBOB futures contract leading the oil complex's rally.

At 10:10 a.m. CT, NYMEX April West Texas Intermediate crude futures rallied $1.29 to $37.79 barrel, off a session high at $38.04. NYMEX April ULSD futures added 2.44 cents to $1.2244 gallon while April RBOB futures jumped 5.01 cents to $1.4379 gallon, off a four-month high of $1.4563 on the spot continuation chart.

EIA reported a 3.9 million bbl crude supply build during the week ended March 4, including another increase at the Cushing, Oklahoma, delivery point for NYMEX WTI crude futures. API reported a 4.4 million bbl stock build while the market expected a 2.75 million bbl increased.

For products, EIA reported a 4.5 million bbl stock draw for gasoline, more than the expected 750,000 bbl stock draw and API's 2.1 million bbl stock draw. Distillate stocks fell 1.1 million bbl, according to EIA, a surprise draw because the market expected a build of 250,000 bbl while API reported a draw of 128,000 bbl.

On demand side, EIA reported gasoline demand up 290,000 barrels per day for the week, with distillates demand up 342,000 bpd and refinery crude oil inputs rose 59,000 bpd.

Aside from mixed fundamentals, the market is also supported by short-term bullish psychology although technical formations point to a market that is overbought.

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