Oil Futures Down Sharply 2nd Day
Oil Futures Down Sharply 2nd Day
NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures swung lower for a second session amid pressure from a stronger U.S. dollar, higher domestic oil supply and fresh reports Russian oil output held nearly steady in February, suggesting a failure to comply with a deal made late last year to cut its production by 300,000 barrels per day (bpd).
The dollar rallied overnight to a 6-1/2 week high after Federal Reserve Governor Lael Brainard on Wednesday signaled a hike in the federal funds rate may be coming soon. Other Fed officials have made similar comments, although Brainard is a well-known dove, so her support for a rate hike reflects a possible consensus by Fed officials for an increase in the key borrowing rate.
Brainard said a strong U.S. economy without global risks meant it would be appropriate to raise rates soon. The comment came a day after the market met President Donald Trump's upbeat address to Congress late Tuesday with exuberance, while Chinese factory data showed more rapid than expected growth in February.
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A rate hike, which observers say now appears inevitable at the Federal Open Market Committee's mid-March meeting, would further bolster the dollar while adding pressure on oil futures.
The Energy Information Administration's weekly oil report Wednesday failed to inspire a rally, said analyst Tim Evans at Citi Futures. It showed the eighth straight weekly increase in crude stocks, up 1.5 million barrels (bbl) in the week-ended Feb. 24 and 6.9% higher year-over-year, and crude production up 31,000 bpd to 9.032 million bpd.
The RBOB futures contract is pressured by concern over oversupply and limited demand for products, especially gasoline, analysts said. EIA reported gasoline production climbed 27,000 bpd to 9.456 million bpd last week, 1.3% higher year-over-year.
Globally, Russian oil ministry released data showing the country's oil output was generally unchanged in February from January at an 11.11 million bpd production rate. That suggests a pause in their efforts to cut 300,000 bpd in production as part of an agreement last December with the Organization of Petroleum Exporting Countries.
In early trade, NYMEX April WTI futures were down $1.06 at $52.77 bbl, near a $52.67 two-week spot low. ICE May Brent crude futures slipped $1.00 to $55.36 bbl, near a $55.30 two-week spot low. The ICE Brent premium over WTI was up 6 cents at $2.59 bbl versus the prior day's close.
The NYMEX April ULSD futures contract dropped 3.17 cents to $1.59 gallon, off a three-month spot low of $1.5867. The NYMEX April RBOB futures contract plummeted 4.13 cents to $1.6367 gallon.
George Orwel can be reached at george.orwel@dtn.com
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