Oil Futures Mixed Ahead of API Report

NEW YORK (DTN) -- Spot-month oil futures on the New York Mercantile Exchange ended mixed Wednesday afternoon, with the West Texas Intermediate crude and ultra-low sulfur diesel contracts settling lower ahead of industry data that's now expected to show a big build in crude oil inventories.

"The market initially feared a stronger dollar but now after the dollar broke down following the FOMC minutes, we see WTI reluctant to move higher on concerns we are likely to see another big build in crude inventories as we've seen in recent weeks, although I must say there are still more bulls than bears in the market," said senior analyst Phil Flynn at Price Futures.

A Schneider Electric survey show expectations for another stock build of 4.0 million barrels (bbl) for crude in the United States during the week-ended Feb. 17, following a 9.5 million bbl increase the week prior to 518.1 million bbl, a near 10.0% year-over-year surplus.

On products, the survey shows gasoline and distillate fuel inventories are estimated to have been drawn down by 1.5 million bbl a piece last week as refinery runs probably eased.

The American Petroleum Institute will issue its report at 4:30 p.m. EST with the Energy Information Administration set to release its report at 11:00 a.m. EST on Thursday.

There were also doubts over whether the 1.758 million barrels per day (bpd) in total oil production cuts agreed to last year by the Organization of the Petroleum Exporting Countries and 11 non-OPEC producers would be able to make a dent on global supply and to achieve a rebalanced market in the face of rising domestic output. The supply cuts that started in January will run through June 30 and there are already calls to extend them through December.

"For all of the talk that OPEC production cuts would tighten the market, U.S. inventories have continued to trend higher, with both crude oil stocks and gasoline inventories posting new record highs in the week ended February 10," said Citi Futures analyst Tim Evans in New York.

ANB AMRO warned WTI and Brent prices could slip back toward $30 bbl if the output cuts are not extended, while Wall Street investment bank Goldman Sachs said the rebound in U.S. oil drilling have exceeded their best case expectations.

At settlement, NYMEX April WTI futures fell 74 cents to $53.59 bbl while April Brent crude futures on the IntercontinentalExchange dropped 82 cents to $55.84 bbl, off a $55.64 three-day low.

In products trade, NYMEX March ULSD futures dropped 1.29 cents to $1.6296 gallon settlement, off a two-week low of $1.6068. NYMEX March RBOB futures bucked the downtrend, settling up 1.93 cents at $1.5133 gallon, reversing off a two-week $1.4838.

In currency trade, the U.S. dollar reversed lower from a one-week high this afternoon after minutes of the Jan. 31 to Feb.1 meeting by the Federal Open Market Committee showed that policymakers saw a downside to a strong dollar, although the majority of the FOMC members thought the Fed should raise federal funds rates soon. The next FOMC meeting scheduled for March 14-15.

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