NYMEX WTI, ULSD Futures Ease Into Close

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled mixed with a downside bias Friday afternoon, with crude oil and ULSD under pressure from a stronger dollar and concerns about a glut of crude oil and gasoline supplies. RBOB futures eked out a modest gain, although the oil futures complex fell on week-over-week basis not only due to oversupply, but also on worries over some weak economic data from Europe.

"The major global petroleum futures markets are now all probing fresh two-month lows after preliminary PMI data for the UK was weaker than expected and consistent with a 0.4% Q3 contraction in gross domestic product," said energy specialist Tim Evans at Citi Futures in New York.

"Oil prices are testing key support levels as they try to balance supply versus demand expectations," said Phil Flynn, a senior analyst at Price Futures Group in Chicago. "Combined U.S. crude oil and refined product stocks are at 2.08 billion barrels, an all-time high, but demand is near all-time highs as well,"

At settlement, NYMEX September West Texas Intermediate futures fell 56cts to $44.19 bbl after trading earlier at a $43.74 intraday low, holding above support at Wednesday's $43.69 2-1/2 month spot low. The spot-month contract ended the week down $1.76 or 3.8%.

On the IntercontinentalExchange, September Brent declined 51cts to a $45.69 bbl settlement, ending near a $45.17 2-1/2 month spot low, while down $1.92 or 4.2% for the week.

In products trade, NYMEX August ULSD futures settled down 1.37cts to $1.3570 gallon, near a 2-1/2 month spot low of $1.3400 while losing 4.04cts or 3.0% for the week.

Gasoline bucked the downtrend, with NYMEX August RBOB futures shaking off early weakness and eking a gain of 0.65cts to a $1.3615 gallon settlement after trading lower at $1.3383, stopped by support at Wednesday's 4-1/2 month spot low at $1.3381.

On Wall Street, U.S. equities were higher while the dollar rose to a 4-1/2 month high on U.S. economic optimism following a string of bullish data pointing to robust housing and labor markets. Those bullish data have led the market to believe the Federal Reserve, which meets next week, may raise federal funds rates in December.

At the same time, the pound came under pressure versus the dollar after data this morning pointed to a looming recession in the United Kingdom. The UK's purchasing managers' index, a measure of business activity, fell to a seven-year low of 47.7 points in July from 52.4 in June. It's one of the first data to measure the economic response to the UK vote to leave the European Union, and it could hurt oil demand.

On supply, the Energy Information Administration midweek indicated a ninth straight weekly decline in U.S. crude stocks for the week-ended July 15, down 2.3 million bbl from the prior week, and down 17.6 million bbl since the string of drawdowns began.

However, at 519.5 million bbl crude stockpiles are 55.6 million bbl or 12.0% above a year-ago. Baker Hughes Inc. also said today that rigs for drilling oil in the United States rose by 14 to 371 for the week-ended July 22. EIA reported Wednesday a modest 9,000 bpd boost in U.S. crude production for the week-ended July 15 to 8.494 million.

EIA showed gasoline stocks at 241.0 million bbl were the most since late April, with supply building 2.1 million bbl in July. Gasoline imports are also high amid global oversupply and further incentivized by a strong dollar.

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