NEW YORK (DTN) -- Spot-month oil futures on the New York Mercantile Exchange settled at fresh highs Wednesday after shaking off early weakness, rallying after the Energy Information Administration showed stock draws for refined products and the first decline in the past three weeks for U.S. crude oil production.
While showing an unexpected build in crude oil inventories, analysts said the EIA report for the week-ended June 23 was bullish, showing production fell by 100,000 barrels per day (bpd) to 9.25 million bpd, easing off a two-year high of 9.35 million bpd posted a week prior.
Crude production declined largely due to offshore Gulf of Mexico shut-ins last week caused by Tropical Storm Cindy, but it also appears domestic output was close to peak even without the storm, said analyst Phil Flynn at Price Futures Group.
The report showed U.S. commercial crude oil inventories added 118,016 barrels (bbl), but crude held in storage at the Cushing, Oklahoma, delivery point for NYMEX West Texas Intermediate crude fell for the sixth straight week, down 300,000 bbl to 60.8 million bbl, and crude held in the Strategic Petroleum Reserve caverns in the Gulf Coast fell 1.4 million bbl.
At 509.2 million bbl, total crude stocks are 13.3 million bbl or 3% above a year ago level and the surplus to their 5-year average dropped to 106.7 million bbl, the lowest level since Sept. 18, 2015. This is also the only second weekly crude stock increase in the past 11 weeks.
On products, the EIA report detailed a gasoline stock draw of 894,000 bbl and middle distillate supplies declined 223,000 bbl for the week-ended June 23, missing expectations for a 700,000 bbl drawdown in gasoline stocks, and a build of 200,000 bbl in distillates.
The EIA report was bullish relative to a report by the American Petroleum Institute, but bearish versus expectations, said analyst Tim Evans at Citi Futures. The report showed lower implied demand for gasoline and distillates for the week reviewed.
Houston-based analyst Kyle Cooper at IAF Advisors noted that total petroleum inventories fell 600,000 bbl last week and posted 1.7 million bbl year-on-year deficit, which is clearly bullish.
Aside from lower crude production, oil futures were also boosted by short-covering after last week's selloff to a technical bear market was overdone.
NYMEX August West Texas Intermediate crude futures settled 50cts higher at $44.74 bbl, off a fresh one-week spot high of $44.84 after punching through resistance at $44.40. With short-term trend higher, settling above resistance provided support for the WTI contract.
IntercontinentalExchange August Brent crude oil futures gained 66cts to $47.31 bbl at settlement.
NYMEX July ULSD futures rallied 1.93 cents to $1.4330 gallon settlement, near a fresh one-week spot high of $1.4370 and breached $1.4148 initial resistance.
July RBOB futures settled 2.35 cents higher at $1.4833 gallon, off a two-week spot high of $1.4866.
The short-term trend turned up for RBOB and the contract settled above initial resistance at $1.4615, which now provides support with the forward curve showing a backwardated price structure.
"We are out of the bear market and so technicals are starting to turn around," said Flynn.
George Orwel can be reached at firstname.lastname@example.org
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