Oil Futures Higher on Product Draws

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled higher Thursday afternoon after the Energy Information Administration reported a bigger-than-expected decline in oil product inventories in the United States for the first week of October.

"The products draw is what lifted the market," said Andy Lipow, the Houston-based president of Lipow Oil Associates. "The report was very bullish below the top-line crude stocks," added analyst Phil Flynn at Price Futures in Chicago.

EIA's Weekly Petroleum Status Report showed U.S. crude stocks increased by 4.9 million barrels (bbl) during the week-ended Oct. 7, gasoline stocks tumbled 1.9 million bbl and distillate supplies plunged 3.7 million bbl during the week reviewed. The market expected stock draws of 1.8 million bbl each for gasoline and distillates, and a 500,000 build in crude oil storage levels.

The NYMEX November ULSD futures contract settled up 1.28 cents at $1.5796 gallon, rallying off a $1.5537 session low, and the November RBOB futures contract settled 1.99 cents higher at $1.4818 gallon rebounding off a $1.4480 intraday low.

NYMEX November West Texas Intermediate crude futures edged $0.26 higher to $50.44 bbl at settlement, and December Brent futures on the IntercontinentalExchange posted a $0.22 gain rose 26 cents to a $50.44 bbl settlement, reversing off a three-day low at $49.36. The December Brent crude oil futures contract on the IntercontinentalExchange advanced 22 cents to $52.03 bbl at settlement.

The EIA's Short-term Energy and Winter Fuels Outlook for October reduced the agency's global oil demand estimate for 2016 and 2017 versus STEO figures published in September.

EIA projects global demand this year at 95.328 million barrels per day (bpd), revised down 29,000 bpd from a 95.357 million bpd estimate published a month ago. For 2017, the EIA expects global demand to reach 96.674 million bpd, that is a 106,000 bpd lower than its month prior 96.78 million bpd projection.

Internationally, Chinese trade data released overnight showed a sizeable increase in the country's crude oil imports. China imported 7.97 million bpd of crude oil in September, 257,000 bpd above its reported August intake, and up 1.16 million bpd higher year-over-year.

Traders remained tuned in for the latest news out of Organization of Petroleum Exporting Countries with regard to any fresh progress in stabilizing the global oil market. Last heard was a claim Russia was onboard to freeze or reduce its crude oil output and will continue to iron out the details. Data showing higher OPEC output in September and a fresh dispute over production quotas for each member country suggest the scheme is not a done deal, analysts said.

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