Oil Futures End Mixed

NEW YORK (DTN) -- New York Mercantile Exchange oil futures retreated from early gains, with the West Texas Intermediate and ULSD contracts settling near unchanged this afternoon while RBOB reversed lower after the release of a mixed weekly government oil report that traders viewed as bearish, prompting a wave of profit taking before the 2:30 p.m. EDT close.

"Total petroleum inventories rose to another new all-time record but not quite at the same pace as the 5-year average, and thus had this surplus reduced slightly," said analyst Kyle Cooper at IAF Advisors. "These EIA numbers are pretty disappointing because we didn't have a draw for crude even though refinery runs rose by a hefty 2%."

Others agreed.

"The crude oil statistics showed another inventory gain, so I think the buying sentiment was misplaced this morning," said Andy Lipow at Lipow Oil Associates. "The market was looking for a bigger [gasoline stock] draw and unfortunately demand declined this week as imports rose."

Earlier, the oil complex had rallied to two-day highs on the back of a weaker dollar, with the greenback plunging to a better than five-month low following the dovish monetary policy posture taken Tuesday by Federal Reserve Chair Janet Yellen.

While down throughout the day, the dollar moved off its low late morning, early afternoon that limited the retreat in NYMEX oil futures, said analysts.

NYMEX May WTI crude oil futures settled up 4cts at $38.32 bbl, off a two-day high of $39.85. ICE May Brent nudged up 12cts to $39.26 bbl, off a two-day high of $40.61 while the June Brent contract rose 20cts to $40.05 bbl

NYMEX April ULSD futures held on to gains of 0.42cts with a $1.1597 gallon settlement, off a two-day high of $1.2012, while April RBOB futures reversed lower, settling down 1.74cts to $1.4364 gallon, sliding from a two-day high of $1.4763.

The May ICE Brent and NYMEX April ULSD and RBOB futures contracts will expire after the 2:30 PM ET close to regular trade Thursday.

On Wall Street, major stock indices were up more than 0.4% for the session, while the dollar plummeted to the lowest level since Oct. 16, 2015, after Yellen in a speech Tuesday dimmed the prospect for a rate increase next month. She cautioned against raising rates too soon because the U.S. economy is facing headwinds from slowing global growth, low oil prices and mixed data at home. A weaker dollar is considered bullish for oil prices since oil is traded in dollars internationally.

The biggest drivers for oil prices were weak supply and demand fundamentals and technical pressure, said analysts.

The Energy Information Administration said crude stockpiles rose 2.3 million bbl during the week-ended March 25, the seventh straight weekly gain, and above the market's estimate of a 1.7 million bbl stock build. The American Petroleum Institute reported a 2.6 million bbl stock build.

The EIA also detailed a 2.5 million bbl stock draw for gasoline, in line with expectations, and a 1.1 million bbl stock decline for distillates, doubling expectations for a 500,000 bbl stock draw.

On demand, EIA reported refinery crude inputs rose 414,000 bpd to 16.234 million bpd, while implied gasoline demand fell 259,000 bpd and implied distillate demand surged 475,000 bpd for the week.

"Technically, WTI has been unable to hold above $40 despite the bullish runs we've had since February 11 when the contract touched lows and that's because that rally was based on technical support rather than fundamentals," said Cooper. "Hedge funds were adding length hoping that fundamentals would get better but they haven't, so that's why those same hedge funds are trying to reduce length and nobody wants to buy because fundamentals are not good. We have the third most bearish inventory situation on record."

The market is now looking ahead to Friday's payroll report from the Bureau of Labor Statistics after private payroll firm ADP this morning estimated the economy added 200,000 jobs this month. The average forecast calls for 195,000 additional jobs for the month.

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