NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled lower Monday afternoon, with West Texas Intermediate edging down for its sixth consecutive session decline to a fresh 3-1/2 month low on the spot continuous chart. ULSD futures also settled at a fresh 3-1/2 month low, ending down fractionally, while RBOB futures lost the most on the session, slipping to a two-week low.
"After the collapse of last week, the market is today trying to see if that breakout was an overreaction to a one-time inventory build," said analyst Phil Flynn at Price Futures.
On March 8, the Energy Information Administration reported an 8.2-million-barrel (bbl) build in commercial crude oil stocks that pushed inventory to a fresh record high of 526.4 million during the week-ended March 3.
NYMEX April WTI futures settled down 9 cents at $48.40 bbl -- the lowest settlement since Nov. 29, 2016, edging off a $47.90 3-1/2 month low on the spot continuation chart. On the IntercontinentalExchange, May Brent crude futures was flat, settling down 2 cents to $51.35 bbl after trading at a 3-1/2 month spot low at $50.85.
The Brent/WTI spread was at a $2.95 bbl better than one-month high Brent premium. Brent's premium over WTI has expanded as U.S. crude oil production has increased. EIA last week reported U.S. crude production increased 56,000 bpd to a better than one-year high of 9.088 million bpd. Output appears to remain on the uptrend, with Baker Hughes, Inc. on Friday, March 10, reporting the eighth consecutive increase in the number of rigs drilling for oil in the United States, up eight to 617 last week, and the most since September 2015.
NYMEX April ULSD future slid 0.30 cent to $1.5006 gallon after trading at a 3-1/2 month spot low of $1.4943. NYMEX April RBOB futures settled 1.94 cents lower at $1.5807 gallon, off a $1.5742 two-week spot low.
Last week, WTI and ULSD contracts sank 9% and 5.6%, respectively, after breaking below a narrow trading range for the first time since the start of 2017.
"[The] market...is certainly still concerned regarding the record-setting uptrend in U.S. crude stocks, but the futures market seems to have come back into a closer balance in Monday trade," said analyst Tim Evans at Citi Futures. "The urgent selling pressure of last week may be drying up at the lower price levels and bargain hunting beginning to emerge, although it is quite early to declare that anything like a confident floor has been established."
Traders now await inventory data for the week-ended March 10 due out late Tuesday from the American Petroleum Institute and midmorning Wednesday from the EIA. An early survey shows the market expects another large crude stock build, seen up between 4.0 million and 5.0 million bbl, and for drawdowns in oil products.
Short-term outlooks will also be released Tuesday morning by the Organization of the Petroleum Exporting Countries and Wednesday morning by the International Energy Agency. Traders will quickly review their expectations for crude production by OPEC and the United States and when a globally oversupplied market would find balance with demand.
On Wednesday, the Federal Reserve will publicize its decision on interest rates, with a boost in the federal funds rate seen strengthening the U.S. dollar. The dollar, which edged off a two-week low in index trading, has an inverse relationship with domestic oil prices since oil trades internationally in dollar denominations.
George Orwel can be reached at email@example.com
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