Oil Rallies to a 5-Week High

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled higher this afternoon for the fifth straight session after the Energy Information Administration reported bigger-than-expected stock draws for crude oil and gasoline for the week-ended Aug. 12, with a weakening dollar adding to the upside for the futures complex.

The dollar traded near Tuesday's seven-week low despite growing expectations for a hike in the federal funds rate. Minutes from the Federal Reserve's last policy meeting in July showed a split within the central bank, with some members voicing support for a rate hike "now or soon," but the majority said more data was need before such a move on rates could be taken.

Earlier today, New York Federal Reserve President Bill Dudley said a rate hike could come sooner than most people think, and an index tracking sentiment on rates showed more investors now think a rate hike is coming in December.

On fundamentals, the EIA data detailed a 2.5 million bbl crude stock draw, surpassing a 1.3 million bbl decline shown in a survey by Schneider Electric. At the Cushing terminal in Oklahoma, the delivery point for the West Texas Intermediate futures contract, crude stocks fell 700,000 bbl, in line the American Petroleum Institute while more than an expected draw of 500,000 bbl. API late Tuesday reported a crude stock draw pf 1.0 million bbl for the week reviewed, with 700,000 bbl of the decline taking place at Cushing.

Domestic crude production rose 152,000 bpd to 8.597 million bpd, the highest since late June, according to the EIA data. For products, EIA reported a 2.7 million bbl stock draw for gasoline, which surpasses an expected 1.7 million bbl draw while API reported an increase of 2.2 million bbl.

NYMEX September West Texas Intermediate crude futures settled 21cts higher at $46.79 bbl, paring gains after posting a $46.95 five-week spot high. Options for the September WTI contract expired this afternoon. The October Brent contract on IntercontinentalExchange advanced 62cts to a $49.85 bbl settlement, moving off a $49.93 new five-week spot high.

In products trade, NYMEX September ULSD futures rose 2.79cts to a $1.4892 gallon, off a $1.4917 five-week spot high. The NYMEX September RBOB futures contract rose 2.79cts to a $1.4505 gallon settlement, off a five-week spot high of $1.4536.

"In addition to the EIA data, the [oil] markets were also affected by the news that the Baton Rouge refinery has had to shut down some of its CDU's as a result of the flooding," said David Thompson, executive vice president at Washington, D.C.-based brokerage Powerhouse. "Both the gas and heat cracks were stronger today."

EIA said distillate fuels stocks increased 1.9 million bbl for the week reviewed instead of an expected draw of 700,000 bbl, while API reported a build of 2.4 million bbl.

On the demand side of the ledger, refinery crude inputs jumped 268,000 bpd to 16.865 million bbl for the week-ended Aug. 12, while implied gasoline demand fell 7,000 bpd to 9.762 million and distillate fuel implied demand tumbled 449,000 bpd to 3.488 million bpd.

The oil futures complex rallied during the prior four sessions amid talk the Organization of Petroleum Exporting Countries and non-OPEC would take action to stabilize oil prices when they informally meet late next month alongside a separate oil conference in Algiers set to be held Sept. 26-28.

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