Oil Futures Settle Higher

Oil Futures Settle Higher

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled higher this afternoon after reversing from multi-month lows during a choppy session, with West Texas Intermediate stabilizing after seven days of losses although it remained in bear market territory.

The futures complex rebounded amid pre-weekend short covering, a weakening dollar and in reaction to speculation Saudi Arabian oil production may be easing. All of those bullish factors negated data showing an increase in the number of active rigs in the United States for the week-ended today and data detailing an anemic U.S. economic growth rate for the second quarter.

The dollar index which had risen to a 4-1/2 month high on Monday (7/25) fell to a three-week low today after data showed U.S. gross domestic product for the second quarter grew at a 1.2% annualized rate, missing an expected 2.6% growth rate, while the Bank of Japan disappointed the market by announcing a relatively small asset purchase program that economists think won't be enough to jumpstart the economy. Moreover, Japan's oil demand fell in June to the lowest level in two decades, according to London-based Energy Aspects.

The oil futures complex had been under pressure in recent days from a glut of domestic gasoline supply despite higher demand for the fuel, and talk of easing product demand in Asia that was linked to the region's slowing economy. And while NYMEX WTI crude, RBOB and ULSD contracts posted modest gains at the close of session this afternoon, the gains only reduced their steep weekly and monthly losses.

At settlement, NYMEX September WTI futures were 46cts lower at $41.60 bbl, reversing off a better than three-month low on the spot continuation chart of $40.57. The WTI contract was down $2.59 or 5.9% for the week while posting a monthly loss of $6.73 or 13.9%.

ICE September Brent expired 24cts lower at $42.46 bbl, off a better than three-month spot low of $41.80. The September contract ended down $3.23 or 7% for the week while posting a monthly loss of $7.22 or 14.5%. The October Brent contract settled up 30cts at $43.53 bbl. In spread trade, spot-month Brent was up 8cts over spot-month WTI.

In products trade, NYMEX August RBOB futures expired up 1.48cts at $1.3210 gallon, reversing off a $1.2760 new five-month low on the spot continuation chart. The August contract lost 4.05cts or 3.0% this week while posting a monthly loss of 18.04cts or 12%. The backwardation in the first two delivery months narrowed to 0.16cts gallon, with the September RBOB contract 1.83cts higher at $1.3194.

NYMEX August ULSD futures expired 0.56cts higher at $1.2760 gallon after reversing from at a better than three-month spot low of $1.2575. The August contract lost 8.1cts or 5.9% for the week while down 20.87cts or 14% for the month. The contango at the front-end of the forward curve widened sharply this week, with the September ULSD contract settling up 0.83cts at $1.3075 gallon, 3.15cts higher than the August contract. That's the biggest contango this year between the two nearest delivered futures contracts.

There were growing concerns demand would be curtailed if the economy truly slows. Currently, U.S. gasoline demand is strong, but that hasn't dented elevated inventories this summer. A backlog of crude supply is expected after the summer peak driving season when refineries will reduce runs and embark on maintenance.

At around midday, Baker Hughes reported the number of active rigs in the United States rose by one and for the fifth straight week to 463, with the number of oil rigs put into service increasing by three this week to 374. U.S. crude oil supply increased 1.7 million bbl during the week-ended July 22 to 521.1 million bbl, Energy Information Administration data showed on Wednesday, 13.4% above a year ago.