Oil Ends the Day Lower
NEW YORK (DTN) -- Spot-month oil futures on the New York Mercantile Exchange settled lower Thursday afternoon, declining for a second straight session amid selling pressure stirred by a stronger dollar, bearish domestic fundamentals and signs Russia isn't making good on their promise last year to cut production by 300,000 bpd during the first half of this year.
"The market was disappointed Russian crude production was the same in February as January, which means their compliance isn't improving, and given that domestic crude supply is at an all-time high while gasoline demand is poor, the market came under pressure," said Houston-based oil analyst Andy Lipow, president of Lipow Oil Associates.
The dollar gained more than 0.3% this afternoon, rallying to a 6-1/2 week high following comments Wednesday by Federal Reserve Governor Lael Brainard indicating that a hike in the federal funds rate may come in mid-March when the Fed's policymaking unit meets to deliberate on the state of the economy and on monetary policy.
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Brainard is the latest Fed official to indicate support for a rate hike this week, although since she's a dove her comments suggest a possible consensus within the central bank for an increase in the key borrowing rate. A rate hike would bolster the dollar while adding pressure on oil futures.
The market is also concerned about the relentless build in domestic oil supply after the Energy Information Administration on Wednesday showed total crude stocks at a new record high of 520.2 million bbl, up 33.5 million bbl or 6.9% from the corresponding week in 2016, said Tim Evans, an analyst at Citi Futures.
Gasoline supply in the United States is also near the record high seen in mid-February at 259.063 million bbl, which has declined to 255.889 million bbl as of Feb. 24. EIA reported gasoline production climbed 27,000 bpd to 9.456 million bpd last week, 1.3% higher year-over-year.
Overseas, Russian oil output was unchanged in February from January at an 11.11 million bpd production rate, data issued by the country's oil ministry showed. That suggests a failure to follow through on their promise last year to cut 300,000 bpd in production as part of an agreement last December with the Organization of the Petroleum Exporting Countries.
NYMEX April WTI futures settled down $1.22 at $52.61 bbl, near a $52.57 three-week spot low. IntercontinentalExchange May Brent crude futures tumbled $1.28 to $55.08 bbl at settlement, near a $55.04 three-week spot low. The ICE Brent premium over WTI was little changed at $2.47 bbl versus the prior day's settlement.
The NYMEX April ULSD futures contract tumbled 4.50cts to $1.5791 gallon at settlement, near a three-month spot low of $1.5780. The NYMEX April RBOB futures contract dropped 3.47cts to a $1.6433 gallon settlement.
George Orwel can be reached at george.orwel@dtn.com
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