Oil Futures Settle Lower on EIA Data

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended lower this afternoon under pressure from bearish oil data from the Energy Information Administration and uncertainty over the referendum Thursday by the United Kingdom on its European Union membership.

Equity markets also turned cautious ahead of the U.K. vote on whether to stay in the EU, with Wall Street stock markets trading sideways, the dollar lower and bond yields edging higher.

The EIA's weekly oil report showed builds for oil products inventories and a smaller-than expected decline in domestic crude oil supply during the week-ended June 17.

The EIA report was bearish compared with market expectations and with the American Petroleum Institute's data issued Tuesday that showed bigger-than-expected stock draws for crude and products. The API data had supported the futures complex overnight into early trade.

"API data was bullish while EIA was very different, so this created a lot of confusion and uncertainty," said Kyle Cooper at IAF Advisors in Houston.

NYMEX August West Texas Intermediate crude oil futures settled down 72 cents at $49.13 per barrel (bbl), reversing off a 12-day spot high of $50.54. The August Brent crude contract on the IntercontinentalExchange settled 74 cents lower at $49.88 bbl, reversing off a 12-day high of $51.24.

In products trade, NYMEX July ULSD futures eased 1.19 cents to $1.5048 gallon at settlement, off a 12-day high of $1.5353 posted earlier in the morning. July RBOB futures slipped 0.47 cent to a $1.5882 gallon settlement, reversing off a 12-day high at $1.6131.

EIA reported that domestic crude oil inventories declined 917,000 bbl in the week-ended June 17, below expectation for a 1.7 million bbl stock draw, while API reported a 5.2 million bbl stock draw.

Domestic crude production fell 39,000 barrels per day (bpd) to 8.677 million bpd, the lowest since September 2014, and down 927,000 bpd year-over-year, the EIA data showed.

The federal also showed the gasoline inventories increased by 623,000 bbl during the week profiled versus an expected 300,000 bbl draw, while API reported a 1.5 million bbl stock draw. Distillate stocks rose by 151,000 bbl versus forecast for a 200,000 bbl stock build and the API reported a 1.7 million bbl decline.

On demand side of the ledger, the EIA data shows modest gains in demand for gasoline, distillates and crude oil for the week.

The market has been volatile over the past week amid uncertainty linked to Britain's referendum over its EU membership. Fresh polls in Britain show Thursday's vote will be a tossup between voters who want the country to remain in the EU and those who would prefer an exit from the bloc.

Most analysts believe Britain will choose to stay in the EU because of concern over economic risks.

Federal Reserve Chair Janet Yellen concluded her testimony today before the U.S. House Financial Services Committee, with little indication about the central bank's thinking on the U.S. economy and the timing of interest rate hikes. On Tuesday, she told the Senate Banking Committee Tuesday that a Brexit was a risk to the economy, and said she would tread carefully as she gauges when to lift interest rates.

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