Oil Futures End Down on Supply

Oil Futures End Down on Supply

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled lower on Thursday as an increase in Iraqi oil exports renewed worries about a global supply overhang, and prompted investors to book profits after Wednesday's rally that was spurred by the first reported decline in U.S. commercial crude inventory in eight weeks.

"Traders recognize that the one-week decline in U.S. crude oil inventories may not have signaled any change in the wider market since the 4.9 million barrel (bbl) draw in crude stocks showed up as increased product inventories," said Tim Evans, an energy specialist at Citi Futures.

Analysts also pointed to weak global economic growth that could trim demand and triggered a selloff in equities and commodities that are perceived as risky.

NYMEX May West Texas Intermediate crude oil futures settled 49 cents lower at $37.26 bbl, reversing off a $38.30 near one-week high. June Brent crude futures on the IntercontinentalExchange slipped 41 cents to settle at $39.43 bbl, reversing off a near one-week spot high of $40.29.

In spread trade, the premium for nearest delivered Brent premium over nearest delivered WTI widened slightly to $2.17 bbl at the close, the biggest premium in three weeks.

NYMEX May ULSD futures settled down 1.46 cents at $1.1257 gallon, reversing off a near one-week spot high of $1.1572. May RBOB futures eased 1.35 cents to a $1.3812 gallon, reversing off a $1.4106 three-day high.

The dollar edged up versus peer currencies after reversing off a six-month low, with a higher greenback bearish for oil futures since oil trades internationally in dollars.

Iraq's crude production increased to a record high of 4.46 million bpd in February, up 275,000 barrels per day (bpd) from January, the oil ministry said. Crude exports from Iraq's two southern terminals have risen to an average of 3.494 million bpd in April, an Iraqi official said, above the 3.286 million bpd average in March.

Also weighing on crude valuations was Libya. Tim Evans at Citi Futures cited comments by Libya that they were making progress in securing oil supply this year. Libyan oil supply has suffered ever since the Arab spring a few years ago.

The market also doubts major oil producers would freeze their production at January levels as proposed earlier this year by Saudi Arabia and Russia. Investment bank Goldman Sachs said it expects the Organization of Petroleum Exporting Countries to increase production by 600,000 bpd this year and by 500,000 bpd in 2017 rather than freeze output at the April 17 meeting with non-OPEC producers.

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