Oil Futures Settle Mixed

NEW YORK (DTN) -- Spot-month ULSD futures on the New York Mercantile Exchange settled lower for the third straight day Thursday but off a two-week spot low, while July West Texas Intermediate crude and RBOB futures eked out fractional gains on a bigger-than-expected crude oil stock draw while data for refined products was mixed.

"The [Energy Information Administration] report was bullish overall but the price action was very bearish," said analyst Kyle Cooper at IAF Advisors in Houston. "Oil sold off hard after the report before rebounding."

EIA's report covering the week before the Memorial Day holiday weekend detailed a large total petroleum draw that was partly due to a Strategic Petroleum Reserve drawdown of nearly 1.0 million barrels (bbl). It also showed total petroleum demand was slightly lower on the week, but record crude exports lowered total supply.

Specifically, the report for the week-ended May 26 showed a surprise 394,000 bbl increase in distillate fuel supplies and a 334,000-barrel-per-day (bpd) decline in demand for the fuel.

A 6.4 million bbl crude oil stock draw and a 2.9 million bbl gasoline stock draw were accompanied by a 1.5% spike in the U.S. refinery run rate to 95.0% of operable capacity, the data showed. Also, crude oil inputs jumped 229,000 bpd to 17.5 million bpd, and gasoline demand climbed 118,000 bpd to 9.8 million bpd.

"Overall, this is a rather bullish report with the total petroleum inventory deficit the largest since June 27, 2014," said Cooper, but he added, "However, total inventories on June 27, 2014, were at 1.778 billion barrels compared to the current 2.018 billion. The surplus to the five-year average also fell but is against a five-year average that seasonally has never been higher."

Cooper said traders focused more on data showing domestic crude oil production rose again last week, up 22,000 bpd to a 9.342 million bpd 21-month high. Production is 610,000 bpd higher than a year ago and 1.28 million bpd above five year average.

"Other than the week before last, production has risen for 20 weeks," he added.

Along with Libyan supply that's rising, the incessant increase in U.S. crude production is keeping the oil market oversupplied, putting pressure on NYMEX oil futures. Traders are concerned the Organization of the Petroleum Exporting Countries and several non-OPEC producers won't be able to rebalance the market this year despite their production cuts of nearly 1.8 million bpd.

NYMEX July WTI crude futures settled up 4 cents at $48.36 bbl while August Brent crude oil futures on the IntercontinentalExchange eased 13 cents to $50.63 bbl after inside trade.

NYMEX July ULSD futures contract settled 1.62 cents lower at $1.5017 gallon, off a $1.4932 fresh two-week low on the spot continuation chart. The July RBOB futures contract gained 0.49 cent to $1.6014 gallon at settlement after inside trade.

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