Oil Futures Settle Mixed
NEW YORK (DTN) -- Spot-month New York Mercantile Exchange oil futures settled mixed after a volatile session Wednesday with June West Texas Intermediate crude eking out a fractional gain while oil products tumbled on the back of a report by the U.S. Energy Information Administration showing a surprise weekly crude oil stock draw and refined oil products builds.
"Although crude oil prices are higher, the details of the report are considered bearish overall," said analyst Kyle Cooper at IAF Advisors in Houston. "Gasoline and distillate stocks both soared even as output fell as yields fell on higher runs. We would expect much higher refined product output next week. Both gasoline and distillate exports fell."
Cooper noted that total petroleum inventories had a net increase of more than 6.0 million bbl while total petroleum demand fell to just above 19.0 million bpd.
The EIA report for the week ended April 21 showed U.S. commercial crude oil inventories declined by a more-than-expected 3.6 million bbl to 528.7 million bbl, 3.8% higher on the year. Crude stocks at the important Cushing terminal in Oklahoma were down by a more-than-expected 1.2 million bbl. Stock changes at Cushing are closely followed by traders because it is the delivery location for NYMEX WTI futures.
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NYMEX June WTI crude futures rallied to a $50.20 bbl three-session high in the wake of the report's issuance before the market turned lower amid concerns that supply is continuing to run ahead of demand. June WTI futures then erased losses during afternoon trade as the market considered the Cushing stock draw and surge in refinery crude inputs, up 347,000 bpd to 17.285 million bpd as refinery runs ramped up 1.2% to 94.1% of capacity -- a 17-month high.
NYMEX June WTI crude futures settled 6cts higher at $49.62 bbl, settling below psychological resistance at $50 bbl for the fourth consecutive session, which is bearish.
The EIA report also showed U.S. production rose 13,000 bpd last week to a 20-month high of 9.265 million bpd, up 327,000 bpd against year prior and 1.24 million bpd above their five-year average. The production increase plus a buildup in U.S. supply surplus have undercut the Organization of the Petroleum Exporting Countries' efforts to reduce global crude stocks to within their five-year average.
Jeff Currie, head of commodities at Goldman Sachs, said OPEC and their 11 non-OPEC allies would eventually agree on extending production cuts of 1.8 million bpd agreed to last year beyond their June 30 expiration otherwise there's a downside risk, with WTI seen falling to $40 bbl if the producers fail to strike another supply deal.
Saudi Arabian oil minister Khalid al-Falih, who last week said six Gulf States that are also OPEC members have agreed to extend output cuts, will meet with Russia over the next two weeks to push for an extension of the oil quota scheme. Iran and Venezuela also support the plan to extend output cuts.
The oil products markets were the weakest part of the oil futures complex Wednesday after the EIA data showed gasoline stockpiles rising 3.4 million bbl for the week ended April 21, while implied demand for the fuel fell 17,000 bpd to 9.2 million bpd. Distillate supplies rose by 2.7 million bbl as implied demand for the fuel plunged 510,000 bpd to 3.7 million bpd for the week reviewed.
"The products data were negative and brought the market down," said analyst Phil Flynn at Price Futures. "We would expect much higher refined product output next week," added analyst Kyle Cooper at IAF Advisors in Houston.
NYMEX May RBOB futures settled 3.27cts lower at $1.5903 gallon, and have since traded at a $1.5800 fresh one-month spot low, with June contract down 3.17cts at $15944. NYMEX May ULSD futures eased 0.85cts to $1.5367 gallon at settlement, moving off a $1.5254 fresh one-month low on the spot continuation charts, with the June contract down 0.81cts at $1.5417. The May products contracts expire on Friday.
The ICE June Brent crude contract fell 28cts to a $51.82 bbl settlement ahead of its expiration on Friday, with the July Brent contract settling down 16cts at $52.41 bbl.
George Orwel can be reached at george.orwel@dtn.com
(CZ)
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