Oil Pares Gains in Midday Trade

NEW YORK (DTN) -- Spot-month oil futures on the New York Mercantile Exchange pared gains in midmorning trade Thursday after the Energy Information Administration issued a weekly oil report that was more bullish than what the market expected, but less bullish on crude than what the American Petroleum Institute reported late Wednesday.

The EIA's Weekly Petroleum Status Report for the week-ended Feb. 17 issued at 11:00 AM ET was bullish for refined products, detailing a 4.9 million bbl stock drawdown for middle distillates that surpassed an expectation for a decline of 1.5 million bbl, while also greater than the draw of 4.23 million bbl reported by API.

The EIA report also showed a gasoline stock drawdown of 2.6 million bbl, more than an expected draw of 1.5 million bbl and well above the 893,000 bbl decline reported by API.

The products stock draw was accompanied by increases in demand, with the data showing implied demand up 230,000 bpd for gasoline and 439,000 bpd higher for distillate fuels for the week reviewed.

WPSR also showed a 563,000 bbl increase in commercial crude supply that was below early week expectations for a 4.0 million bbl yet compared with an 884,000 bbl drawdown reported Wednesday afternoon by the API.

Refinery crude inputs fell 187,000 bpd for the week reviewed while the refinery run rate dropped 1.1% to 84.3% of capacity.

Despite the small crude stock build nationwide, crude supply at the Cushing terminal in Oklahoma, the delivery point for NYMEX West Texas Intermediate crude futures, declined by 1.5 million bbl while the survey anticipated a draw of 500,000 bbl and API reported a 1.73 million bbl decrease.

"[This is] a bullish report with oil production the biggest bearish factor," said analyst Kyle Cooper at IAF Advisors in Houston.

EIA reported domestic crude production increased 24,000 bpd to a more than 10-month high of 9.001 million bpd.

At 11:20 AM ET, NYMEX April WTI futures were up 91cts at $54.50 bbl, off a $54.94 seven-week spot high. The April Brent crude futures contract on the IntercontinentalExchange rallied 76cts to $56.60 bbl.

NYMEX March ULSD futures climbed 3.49cts to $1.6645 gallon, off a $1.6819 three-week high. NYMEX March RBOB futures were 2.17cts higher at $1.5350 gallon, off a $1.5586 one-week high.

Both the EIA and API data suggest demand is picking up and could be supported further by a strong U.S. economy and President Donald Trump's plan for tax cuts, said analysts.

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