Oil Edges Higher Wednesday

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures traded on the New York Mercantile Exchange and Brent crude on the IntercontinentalExchange edged higher early Wednesday, consolidating at the low end of Tuesday's trade range, with the RBOB contract slipping to a one-week low overnight ahead of weekly supply data from the Energy Information Administration.

The modest gains follow Tuesday's selloff to new lows, with July West Texas Intermediate futures expiring at a nine-month settlement low on the spot continuation chart. Brent, ULSD and RBOB futures all registered seven-month low settlements on their spot continuous charts Tuesday.

Aggressive long liquidation in June has pressed WTI, Brent and ULSD futures into bear markets, with all the commodities down 20% or more from the start of 2017. RBOB futures are down 16.5% from the start of the year, and 19.4% from April's $1.7710 gallon high and the current 2017 high.

At 9:00 AM ET, August WTI futures were modestly higher at $43.59 bbl, with ICE August Brent crude flat near $46.00 bbl. Brent's premium to WTI narrowed to a one-week low near $2.35 bbl, with a wider WTI discount seen necessary to encourage greater U.S. crude exports.

The EIA reported U.S. crude exports at 722,000 bpd during the week ended June 9, below May's average of 926,750 bpd.

WTI futures contango narrowed slightly overnight as the August contract moved to nearest delivery after the calendar spreads widened through the month. The widening contango encourages storage plays, which involves buying product and futures, and holding the supply in inventory.

On June 9, EIA reported total U.S. commercial crude and oil product inventory at a four-month high, while a Bloomberg index shows floating storage--supply on stationary tankers--reached a record high.

NYMEX July RBOB futures were fractionally higher near $1.4245 gallon at 9:00 AM ET, edging off a one-week low of $1.4157 gallon, with July ULSD futures up a modest 30 basis points at $1.3980 gallon.

The flat market early session follows mixed weekly supply data released Tuesday afternoon by the American Petroleum Institute, and in front of the 10:30 AM ET release of the EIA's Weekly Petroleum Status Report.

API reported a larger-than-expected draw in commercial crude supply of 2.72 million bbl for the week ended June 16, and a greater-than-projected build in distillate fuel supply of 1.84 million bbl. Gasoline stocks edged up 346,000 bbl last week, said API.

The previous two weekly EIA reports sparked aggressive long liquidation selling.

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


Brian Milne