Oil Futures End Up on Stock Draws

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled higher Wednesday afternoon, rallying after the U.S. Energy Information Administration showed a bigger-than-expected weekly stock draw for gasoline, a draw for crude stocks at the Cushing delivery point in Oklahoma and a surge in crude oil demand.

NYMEX September West Texas Intermediate crude oil futures settled $1.32 or 3.3% higher at $40.83 gallon, settling above the psychologically important $40 level. The WTI contract still remains in a bear-market territory however, losing 21% of its value since reaching a $51.67 high on June 9.

The IntercontinentalExchange October Brent crude contract gained $1.30 or 3.1% to $43.10 barrels (bbl) at settlement.

In products trade, the NYMEX September ULSD futures contract gained 2.85 cents or 2.3% for a $1.2875 gallon settlement. September RBOB futures settled 3.83 cents or 2.9% higher at $1.3499 gallon.

On Wall Street, equities edged higher while the dollar rallied.

EIA data showed domestic commercial crude stocks rose by 1.4 million bbl in the week-ended July 29, missing an expected a drawdown of 1.5 million bbl. However, crude oil stocks at Cushing, the delivery point for the NYMEX WTI contract fell 1.1 million bbl to 64.1 million bbl.

Demand for crude last week surged, with crude inputs at U.S. refineries up 266,000 barrels per day (bpd) while refinery runs climbed 0.9% to 93.3% -- the highest run rate in more than nine months.

For refined products, EIA detailed a draw of 3.3 million bbl for gasoline stockpiles, more than an expected decline of 500,000 bbl. Production of the fuel fell 76,000 bpd on the week, but at 238.2 million bbl total gasoline inventories remain well above the upper limit of the average range.

EIA shows implied gasoline demand declined 45,000 bpd for the week to 9.752 million bpd, although was 0.7% higher than the same week a year ago.

EIA showed a distillate fuel stock build of 1.2 million bbl versus an expected stock draw of 1.0 million bbl. Implied demand for distillates fell 64,000 bpd to 3.856 million bpd for the week, but remain 6.3% higher year-over-year.

U.S. oil demand is expected to ease next month when pre-winter refinery maintenance begins, analysts said.

Looking forward, the July U.S. payroll report is due on Friday, with consensus estimates calling for 175,000 new jobs created. This morning, ADP reported that 179,000 were added to the nation's private payrolls in July.

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