Oil Rallies Ahead of EIA Supply Report

NEW YORK (DTN) -- New York Mercantile Exchange oil futures advanced Wednesday morning ahead of weekly supply data from the Energy Information Administration that's expected to detail stock draws for refined products and another build for crude in the United States.

Led by an RBOB futures rally, the oil futures complex has bounced back after Tuesday's losses, boosted by the American Petroleum Institute's data issued late Tuesday that showed larger stock draws for U.S. refined products than the market expected. The complex shrugged off a larger-than-expected build in domestic crude oil stockpiles.

The Energy Information Administration is scheduled to publish its oil supply report for the week ended March 4 at 9:30 a.m. CT.

At 8 a.m. CT, NYMEX April West Texas Intermediate crude futures advanced 60 cents to $37.10 barrel after inside trade, while May Brent crude futures on the IntercontinentalExchange climbed 68 cents to $40.33 bbl.

In products trade, NYMEX April ULSD futures added 2.05 cents to $1.2205 gallon, while April RBOB futures rallied 3.49 cents to $1.42227 gallon.

On Wall Street, U.S. major averages were about 0.4% higher, tracking gains for the oil market while the dollar moved higher versus peer currencies including the euro ahead of Thursday's European Central Bank policy meeting. Analysts speculate the ECB could announce further stimulus measures to jumpstart the Eurozone's economic growth.

For oil futures traders, the focus is on fundamentals, psychology and technical formations that are pointing in different directions. Supply and demand fundamentals are bearish, psychology or sentiment is bullish, and technical charts are indicating an overbought market.

Futures market speculators are betting on leading oil producers including Saudi Arabia and Russia will agree to freeze their oil production at January levels and U.S. output will continue to decline.

The Organization of Petroleum Exporting Countries and non-OPEC oil producers are set to hold a meeting in Russia at the end of this month in an attempt to finalize the output freeze deal, but the outcome is uncertain since Iran has made clear it won't stop raising its output until it reaches pre-sanctions level of about 3.6 million barrels per day, and Kuwait will not participate unless Iran agrees to freeze its output at January levels.

The global market remains oversupplied and on Tuesday the Energy Information Administration revised down its demand outlook for 2016 and 2017 by 174,000 bpd and 422,000 bpd versus February estimates.

On the domestic front, API reported a 4.4 million crude stock build for the week ended March 4, including a 692,000 bbl increase at Cushing terminal in Oklahoma, the delivery point for NYMEX WTI. API also reported a 2.1 million bbl stock draw for gasoline and a 128,000 bbl decline in total distillate inventory levels.

Looking ahead, the market will be keeping a close watch on Thursday's meeting by the European Central Bank for any announcement of stimulus measures, and on Friday for the March Oil Market Report by the International Energy Agency.

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