NYMEX Oil Futures Lower

CRANBURY, N.J. (DTN) -- Oil futures with nearest delivery on the New York Mercantile Exchange ended lower for the fifth consecutive session, and settled near one-month lows while the spot-month Brent crude contract on the IntercontinentalExchange settled near a three-week low, with oil futures moving lower despite supportive data and a weaker U.S. dollar.

The U.S. dollar index tumbled following the 2:00 p.m. EDT news release from the Federal Reserve indicating no change in the federals fund rate, with the sell-off in the greenback occurring despite widespread expectations that the central bank would hold the rate unchanged.

The dollar's sell-off took place during market-on-close trade for oil futures, and despite a weaker dollar typically boosting domestic crude values, oil futures added to losses.

NYMEX July West Texas Intermediate futures settled down 48cts at $48.01, holding above support at $47.26 with a $47.55 low traded early in the session. ICE August Brent settled down 86cts at $48.97 bbl and above a $48.67 low, with support marked at $47.58.

NYMEX July ULSD futures settled down 2.42cts at $1.4778 gallon, holding above support at $1.4662 with a $1.4689 low. NYMEX July RBOB futures ended down 1.99cts at $1.5014 gallon, with the settlement the lowest in more than a month, while holding above $1.4484 support with a $1.4738 low.

The subsequent news release following the two-day Federal Open Market Committee meeting indicated bank officials observed a pick-up in U.S. economic activity since they last met in April, while the improvement in the labor market slowed. This follows May's dismal employment report released earlier this month that was widely viewed to have forced the Fed to leave interest rates unchanged this week.

Comments in the news release emphasized the central bank's focus on data in making its decision on the federal funds rate, and also indicated the Fed's concern over global issues.

"This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments," read the news release.

While not mentioning the topic in its release, some in the market have suggested the Fed would hold the line on increasing the federal funds rate ahead of Britain's June 23 referendum on European Union membership. A few weeks ago, many in the market were speculating that the Fed would hike the federal funds rate this week, and that Britain would stay in the EU. Since then exiting the bloc has gained momentum, with an exit by Britain seen slowing the European economy in the short- and medium-term.

The lower close also follows supportive supply data released midmorning by the Energy Information Administration, which reported a fourth straight draw from U.S. commercial crude oil inventory, a decline in domestic crude production, a larger-than-expected decrease in gasoline inventory, and higher demand for oil products for the week ended June 10.

The 900,000 bbl draw in commercial crude oil inventory was below expectations for a 2.25 million bbl decline, but supportive versus a 1.2 million bbl build reported by the American Petroleum Institute late Tuesday. EIA also reported a supportive 29,000 bpd decline in U.S. crude production to 8.716 million bpd, the lowest output rate since September 2014.

The data was bullish for gasoline, with a 2.6 million bbl decline in supply contrasting with an API reported 2.3 million bbl build, and more than a market estimated 500,000 bbl draw. EIA also reported a 194,000 bpd increase in implied gasoline demand to 9.762 million bpd.

EIA statistics were bearish for ULSD futures, although an 800,000 bbl build in distillate fuel inventory was well below a 3.7 million bbl increase reported late Tuesday by the API, while the market had anticipated a modest 250,000 bbl draw. Implied demand for distillate fuel increased 240,000 bbl to 3.817 million bpd for the week reviewed.

Today's lower close also follows a bullish short-term outlook released Tuesday by the International Energy Agency that sees the global market in balance late this year on stronger-than-expected demand, unplanned supply disruptions, and sharply lower oil production from producers that are not part of the Organization of the Petroleum Exporting Countries. IEA did note that high inventory levels would cap the upside in oil prices.

Brian L. Milne can be reached at brian.milne@dtn.com

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