Oil Futures Settle Mixed

CRANBURY, N.J. (DTN) -- Oil futures with nearest delivery traded on the New York Mercantile Exchange settled shallowly mixed following Wednesday's selloff, with West Texas Intermediate ending at a fresh low for 2017 while products notched modest gains. Trade was listless following Wednesday's bludgeoning, with bearish data released midweek continuing to chill sentiment Thursday.

Oil futures are in a medium-term downtrend, and pressed down to fresh intraday lows on their spot continuation charts Thursday. Market sentiment is bearish.

Stubbornly high global oil inventories and building U.S. gasoline stockpiles since Memorial Day joined an outlook for the oil market that supply growth from oil producers that are not part of the Organization of the Petroleum Exporting Countries would be more than the annual increase in global oil demand in 2018, triggering heavy selling midweek.

These bearish features overpowered expectations for strong demand in the third quarter that is expected to outpace new supply by 400,000 barrels per day (bpd) to 500,000 bpd and trigger drawdowns from bloated global inventory. However, the International Energy Agency on Wednesday said even if the OPEC, non-OPEC coalition maintain their production cuts of nearly 1.8 million bpd through the end of the first quarter 2018 as agreed, global oil inventory would likely not be drawn down to the five-year average until March 2018.

NYMEX July WTI futures traded in a tight 50 cents range as July WTI options expired this afternoon, with July futures settling down 27 cents at $44.46 per barrel (bbl) -- the lowest settlement on the spot continuous chart since Nov. 14, 2016. The WTI contract tested retracement support at $44.09 bbl, with additional support at the $43.76 intraday low plumbed in early May. The August contract settled down 25 cents at $44.68 bbl.

WTI futures were also under pressure from a stronger U.S. dollar that rallied to a two-week high today following the Federal Reserve's decision to hike the federal funds rate 25 basis points to 1.25%. Wednesday's rate hike was the second of the year and fourth in the current monetary policy tightening cycle.

The rate hike, which signals confidence in the U.S. economy, was followed by news from the Labor Department this morning that first-time filings for unemployment benefits declined 8,000 during the week ended June 10. The U.S. unemployment rate dropped to a 4.3% 16-year low in May.

This morning, the Federal Reserve said U.S. industrial production was unchanged in May following a 1.1% increase in April, missing expectations for a 0.2% boost. However, mining output surged 1.6% last month after a 1.5% jump in April.

NYMEX July RBOB futures settled up 0.3 cent at $1.4357 gallon, reversing from a $1.4101 fresh 6-1/2 month low on the spot continuous chart. July ULSD futures edged 0.44 cent higher from Wednesday's 2017 spot settlement low to settle at $1.4146 gallon after reversing from a $1.4032 six-week low on the spot continuation chart.

August Brent crude futures on the IntercontinentalExchange ended down 8 cents at a fresh 2017 low settlement on the spot continuation chart of $46.92 bbl, and near a $46.70 fresh six-week intraday spot low, testing support at the $46.64 May low.

Brian L. Milne can be reached at brian.milne@dtn.com

(BAS)

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