Oil Settles Higher Wednesday

NEW YORK (DTN) -- Spot-month oil futures on the New York Mercantile Exchange settled higher Wednesday afternoon led by the RBOB contract after the Energy Information Administration reported strong demand for gasoline that offset a big build in crude oil inventories.

"Demand came back strong, which suggests recent talk about soft demand was overstated," said analyst Phil Flynn at Price Futures. "Also a scrutiny of the build crude stock build showed most of it was due to two things: first, the high crude import from Saudi Arabia that we saw in the data today is the last hurrah because the Saudis are now cutting exports and we are unlikely to see that kind of import data soon. Also, it reflected a reclassification or the sale of oil from the Strategic Petroleum Reserve to the tune of more than 6 million bbl."

NYMEX March RBOB futures spiked 6.52cts to a $1.5527 gallon settlement after reversing from a better than two-month spot low of $1.4650, while March West Texas Intermediate futures settled up 17cts at $52.34 bbl, reversing off a $51.22 two-week low.

NYMEX March ULSD futures added 1.39cts on the session for a $1.6360 gallon settlement, reversing from a $1.6028 one-week spot low. ICE April Brent crude oil futures gained 7cts to a $55.12 bbl settlement, reversing off a $54.44 two-week spot low.

EIA's Weekly Petroleum Status Report covering the week-ended Feb. 3 showed a staggering 13.8 million bbl surge in commercial crude stockpiles for the week profiled, with supplies at the Cushing, Okla., terminal rising by 1.1 million bbl. A survey estimated a crude stock build of 2.7 million bbl nationwide and a decline in Cushing stockpiles. U.S. crude imports jumped 1.082 million bpd to a 52-month high of 9.372 million bpd.

Total product supplied to market jumped 1.507 million bpd to a 20.814 million bpd 2-1/2 month high during the week reviewed, with exports up 641,000 bpd to a 5.381 million bpd six-week high, EIA data showed.

The report detailed a 631,000 bpd surge in implied gasoline demand to 8.941 million bpd, the highest rate of gasoline supplied to market since the week before Christmas. Implied distillate demand also rose by 101,000 bpd to a 3.910 million bpd three-week high, aided by a 217,000 bpd increase in exports to 1.097 million bpd.

Overseas, the compliance rate is strong for the 1.758 million bpd in production cuts agreed to late last year by the Organization of the Petroleum Exporting Countries and 11 non-OPEC oil producers. The producers implemented the output cuts on Jan. 1 for a six-month term. OPEC is reported to have so far achieved better than 80% compliance, which has boosted market sentiment. EIA's Short-term Energy Outlook released Tuesday said the global market could rebalance this year due to the cuts.

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