NEW YORK (DTN) -- New York Mercantile Exchange oil futures slumped Wednesday morning, falling ahead of the release of weekly oil inventory data by the Energy Information Administration that's expected to show a build in U.S. crude oil supply while the dollar again strengthened.
The American Petroleum Institute late Tuesday reported a bigger-than-expected build in crude oil inventories in the United States for last week.
At 9 a.m. ET, NYMEX May West Texas Intermediate crude oil futures were 58cts lower at $40.87 bbl while May Brent futures on the IntercontinentalExchange eased 44cts at $41.35 bbl. NYMEX April ULSD futures declined 1.48cts to $1.2373 gallon while April RBOB futures eased 0.21cts to $1.4950 gallon, reversing lower after rising to a $1.5134 gallon nearly seven-month high on the spot continuation chart.
On Wall Street, futures for U.S. equity market indices were lower while the dollar surged to a one-week high on comments by Federal Reserve officials.
API late Tuesday reported domestic crude oil stockpiles increased by 8.8 million bbl during the week-ended March 18, reinforcing existing evidence that the market is awash with oil supply heading into the peak period for seasonal refinery maintenance. The stock build came despite a 1.4 million bbl inventory drawdown at the Cushing supply point in Oklahoma, the delivery location for NYMEX West Texas Intermediate crude futures.
A survey of analysts had shown the market expected a 3.0 million bbl nationwide crude oil stock build.
API also reported distillate supplies were drawn down 391,000 bbl, less than an expected 1.3 million bbl stock draw, and gasoline stockpiles declined by 4.3 million bbl, surpassing an expected 1.8 million bbl drawdown.
The Energy Information Administration is scheduled to release its weekly data at 10:30 a.m. ET.
Oil futures have been supported in recent weeks by improved gasoline demand and the prospect of a freeze in production at January levels by Russia and the Organization of Petroleum Exporting Countries.
Ahead of the terrorist attacks in Brussels early Tuesday, crude futures had rallied on news that Saudi Arabia is prepared to join an oil output freeze scheduled to be discussed on April 17 in Qatar without Iran taking part. That represents a major concession by the Saudis who previously said they would only freeze production if all OPEC members did so too.
Iran has refused to participate in a freeze agreement, having won relief from sanctions that month on its crude exports, and intent on rapidly increasing its production to 4.0 million bpd. Citing secondary sources, OPEC in its latest Monthly Oil Market Report showed Iranian crude production in January at 2.944 million bpd and at 3.132 million bpd in February.
Nonetheless, the Saudi concession raised the prospect of coordinated efforts by major international oil producers to address a global oil supply glut. Critics of the potential deal note however production by the Saudis, Iraq and Russia were at or near record high output rates in January. This morning, the International Energy Agency said the production freeze plan was meaningless because only Saudi Arabia has the capacity to increase production.
George Orwel can be reached at email@example.com
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