NYMEX Oil Futures Close Lower

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures with nearest delivery tumbled to new one-month lows during market-on-close trade Thursday with Brent crude futures on the IntercontinentalExchange printing a one-month low midday, with oil futures now down for a sixth consecutive session as concern over an exit from the European Union by Britain spurs worry over economic growth.

After the 2:30 p.m. EDT settlements, oil futures printed fresh lows, breaking down support, adding an explanation point that the early month rally has reversed to a downtrend.

NYMEX July West Texas Intermediate futures settled down $1.80 at $46.21 bbl, and fell to a $46.15 one-month low on the spot continuation chart ahead of the close, and since slipped to a $45.91 bbl low.

ICE August Brent futures settled down $1.78 at $47.19, and fell to a $46.94 bbl one-month spot low since settlement.

NYMEX July ULSD futures settled down 5.49cts at $1.4229 gallon, and near a $1.4207 one-month low on the spot continuation chart during MOC trade, adding to the decline after the close with a $1.4165 print.

NYMEX July RBOB futures settled down 3.61cts at $1.4653 gallon and near a $1.4630 better than one-month spot low, sliding another 41 points since the close to $1.4589.

Momentum has shifted ahead of Britain's June 23 referendum on EU membership towards exiting the bloc, which earned a rebuke earlier today from the Bank of England that said leaving the EU would harm Britain's economy. A number of analysts have said Britain's exit from the bloc would slow economic growth in Europe.

Those concerns stayed the hands played by central banks this week, with the Bank of England leaving its benchmark interest rate unchanged at 0.5%, and the Bank of Japan holding its key interest rate at a negative 0.1%.

Wednesday afternoon, the Federal Reserve left unchanged at 0.25% the federal funds rate, which was widely expected after the Labor Department earlier this month reported poor job growth in the United States and revised lower previous month job gains. The report suggested potential headwinds for the U.S. economy. The Fed's news release Wednesday highlighted their dependence on data when making a decision on changing interest rates, while Fed Chair Janet Yellen in subsequent comments said low interest rates would endure longer than previously suggested, calling it a new normal.

The U.S. dollar surged early in the session to a two-week high in index trading, retracing the loss following the May employment report, reversed lower early afternoon, and again strengthened.

Soggy reports on inflation, unemployment, housing and manufacturing added to the dollar's volatility that were positive, but highlighted the sluggish nature of U.S. economic growth.

The Bureau of Labor Statistics reported a 0.2% increase in the Consumer Price Index for May, although expectations were for a 0.3% hike. The Labor Department reported a 13,000 increase in first-time filings for unemployment insurance to 277,000 during the week ended June 11, although the four-week average slipped 250 to 269,250. The National Association of Home Builders/Wells Fargo Housing Market Index said builder confidence in the market for newly constructed single-family homes rose the most since January, yet builders where concerned over scattered softness and a labor shortage.

The Federal Reserve Bank of Philadelphia in their Manufacturing Business Outlook Survey today reported little growth in June, and said "other broad indicators continued to reflect general weakness in business conditions."

Slowing economic growth would weaken demand for crude, and demand this year has so far outpaced expectations, prompting the International Energy Agency on Tuesday to revise higher its oil demand growth expectation for 2016 by 200,000 bpd to 1.3 million bpd.

Strong demand growth, with the IEA highlighting India and the United States as key drivers, is one of the factors that the IEA said is correcting a global market supply-demand imbalance, which the agency sees reaching equilibrium during the second half of 2016, quicker than initially projected.

IEA also said unplanned outages, especially in May, alongside expectations for supply from producers that are not part of the Organization of the Petroleum Exporting Countries to contract by 900,000 bpd this year, with the U.S. accounting for 500,000 bpd of the decline, as the other main feature for the market rebalancing.

Unplanned supply disruptions in May totaled 3.7 million bpd, according to the Energy Information Administration, with the lion's share of the outages from Canada amid massive wildfires and Nigeria due to sabotage.

The outages were the catalyst in spurring the early month rally by oil futures. However, Canadian production is gradually returning and the Nigerian government is in talks with militants that could end the attacks on oil and gas infrastructure.

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

(CZ)

Brian Milne