Oil Shallowly Mixed in Early Trade

NEW YORK (DTN) -- New York Mercantile Exchange oil futures opened the regular trade session shallowly mixed Wednesday morning as traders recalibrated their expectations in front of a weekly report that’s expected to show a stock build for crude and stock draws for refined oil products, while a stronger dollar weighed on West Texas Intermediate.

The Energy Information Administration will release its data covering the week-ended March 3 at 10:30 AM ET.

Data issued late Tuesday by the American Petroleum Institute was mixed, as it showed bearish crude statistics and bullish products data.

API reported crude stocks soared 11.6 million bbl last week versus expectation for a 2.0 million bbl stock build. Gasoline stocks plunged 5.0 million bbl, more than twice expectation, and middle distillate fuel supply declined by 2.9 million bbl, nearly three times the estimated build.

Aside from inventories, traders are looking for crude production data that has been rising steadily in recent weeks. On Tuesday, the EIA’s Short-term Energy Outlook forecast a 300,000 bpd increase in domestic crude production in 2017 to 9.2 million bpd and to 9.7 million bpd in 2018.

EIA expects gains in non-OPEC supply, especially in the United States, to offset production cuts by the Organization of the Petroleum Exporting Countries, and to limit oil futures’ upside through much of this year.

Saudi Arabia and Russia, the architects of the current output cuts of 1.758 million bpd by OPEC and 11 non-OPEC nations, tried overnight to allay doubts over the effectiveness of the ongoing cuts in reducing global supply.

Saudi Arabian oil minister Khalid al-Falih acknowledged global crude inventories are not being drawn down as quickly as he would like, potentially opening the door for an extension of the current output cuts to December. Iraq and Angola have called for an extension of the cuts.

Russian oil minister Alexander Novak said Moscow would cut production further in April after reports recently suggested Russia was lagging in compliance with its 300,000 bpd in agreed to production cuts.

In early trade, spot-month NYMEX April WTI futures were down 77cts at $52.37 bbl, near a $52.30 one-month low on the spot continuation chart. On the IntercontinentalExchange, May Brent crude futures slid 67cts to $55.25 bbl.

In products trade, NYMEX April ULSD futures eased 0.46cts to $1.6093 gallon and NYMEX April RBOB futures edged up 0.71cts to $1.6869 gallon.

In currency trade, the dollar nudged up to a three-day high after ADP Employment Services reported 298,000 private sector jobs were added to payrolls in February. If confirmed on Friday by the Labor Department’s monthly jobs report, that robust labor market would almost guarantee that the Federal Reserve would raise interest rates at its March 14-15 meeting, said analysts.

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