Oil Futures Settle Higher Wednesday

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled higher Wednesday afternoon, rallying after the U.S. Energy Information Administration released data showing a steep drawdown in commercial crude oil stocks occurred last week.

"Crude stocks plunged despite much lower imports," said analyst Kyle Cooper at IAF Advisors in Houston. "Total U.S. inventories fell 3.6 million barrels (bbl) and continued a bullish inventory trend."

Oil prices also rose after Saudi Arabian Energy Minister Khalid al-Falih said nonmembers of the Organization of Petroleum Exporting Countries were willing to cut their own production. The Saudis have been negotiating with Russia, which pledged last week to join OPEC in rebalancing the market, agreeing to cut or freeze its own output.

OPEC hopes to finalize their Sept. 28 agreement to limit output to 32.5 million to 33.0 million barrels per day (bpd) when they meet in late November.

NYMEX November West Texas Intermediate crude futures settled $1.31 higher at $51.60 bbl ahead of expiration Thursday afternoon, trimming an advance to a 15-month spot high of $51.93. The December contract was up $1.20 at $51.82 at settlement.

The December Brent futures contract on IntercontinentalExchange climbed 99 cents to a $52.67 bbl settlement, off a one-week high of $53.14.

In products trade, NYMEX November ULSD futures settled 1.93 cents higher at $1.5879 gallon, near a one-week spot high of $1.6077. The November RBOB futures contract settled up 0.79 cent at $1.5136 gallon, moving off a $1.5191 nearly eight-week high on the spot continuation chart.

The EIA report detailed crude oil stockpiles plunged 5.3 million bbl for the week-ended Oct. 14 versus an expected build of 2.5 million bbl. At the Cushing supply hub in Oklahoma, crude inventories fell to 59.7 million bbl from 61.3 million bbl the week prior EIA data shows, above calls for a 300,000 bbl decline.

On products, distillate fuel supplies declined a less-than-expected 1.3 million bbl versus an anticipated 2.0 million bbl draw. Gasoline stocks posted a 2.5 million bbl build, EIA reported, versus expectations for a 1.5 million bbl stock draw.

On the demand side of the ledger, the data showed declines across the board for refined products and refinery crude intake, which is a proxy for crude oil demand.

Data shows implied demand for distillates fell 279,000 bpd to 3.987 million bpd last week, 4.4% higher year-over-year. Implied gasoline demand tumbled 466,000 bpd to 8.798 million bpd, nearly 4% lower than a year ago.

"Crude stocks tend to build at this time of the year, but we've seen inventories being drawn down more this year and any builds are less than seasonal patterns," said Jonathan Goldberg at BBL Commodities.

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