Oil Settles Sharply Lower Wednesday

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled sharply lower Wednesday afternoon after the U.S. Energy Information Administration reported a build in crude oil stocks during the first week of August as refiners cut back runs and imports remained strong.

The bearish crude data was unexpected and offset modestly bullish products data detailing drawdowns and greater implied demand for gasoline and distillate fuels for last week, although overall product demand was down. The decline in gasoline supply was greater than expected, and distillate stocks were drawn down in contrast to expectations for a modest build.

"Crude oil inventories rose for the third consecutive week and total petroleum inventories rose for the sixth consecutive week, and crude imports remained well above 8 million bpd for the fourth week," said analyst Kyle Cooper at IAF Advisors in Houston.

The EIA data for the week-ended Aug. 5 showed a more-than-expected 2.8 million bbl gasoline stock draw to 235.4 million bbl, while demand for the fuel rose 17,000 bpd to 9.769 million bpd. The data also showed a surprise draw for distillates, with the fuel's stocks down 2.0 million bbl to 151.2 million bbl, while demand for the fuel jumped 332,000 bpd to 3.9 million bpd.

EIA reported crude stockpiles increased 1.1 million bbl to 523.6 million bbl during the week reviewed, while refiner crude inputs dropped 255,000 bpd. The market expected a crude draw of 2.5 million bbl while API reported a crude stock build of 2.1 million bbl.

NYMEX September ULSD futures shed 1.23cts to $1.3184 gallon at settlement, off a $1.3114 three-day low. NYMEX September RBOB futures tumbled 4.48cts to a $1.3014 gallon settlement, off a one-week low of $1.2973.

NYMEX September West Texas Intermediate crude futures dropped $1.06 to a $41.71 bbl settlement, off a $41.49 three-day low. October Brent on the IntercontinentalExchange fell 93cts to $44.05 bbl, off a $43.84 three-day low.

Ahead of the weekly statistics, the Organization of Petroleum Exporting Countries released its Monthly Oil Market Report Wednesday morning that raised the producer group's global demand estimate and also its projection for non-OPEC supply for this year.

What caught market interest in the report however, was a 123,000 bpd jump in Saudi Arabian crude oil production to 10.673 million bpd in July based on direct communications that compares with a 2015 average production rate by the kingdom of 10.193 million bpd and output averaging 9.713 million bpd in 2014--the year OPEC abandoned their quota system.

July's production rate also contrasted with the report's secondary sources totals, which show a 30,000 bpd increase in Saudi crude oil production to 10.477 million bpd.

The report, citing preliminary data, also indicates a 14.5 million bbl rise in U.S. oil stocks to 1.39 billion bbl in July, 116 million bbl more than year prior and 242 million bbl above the five-year average.

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