Oil Futures Settle Up Thursday

NEW YORK (DTN) -- Spot-month oil futures on the New York Mercantile Exchange ended higher, but settled off session highs Thursday afternoon, paring early gains and turning mixed after the close of regular trade as market focus turned from stock draws to data showing crude production in the United States rebounded last week.

"The ending of today's trade was bearish technically since the EIA report was so solid that it should have supported prices," said analyst Kyle Cooper at IAF Advisor in Houston. "I think it's because the focus has changed to production, and the numbers show we recouped the prior week's losses despite a decline in the rig count for the week-ended June 30."

EIA's Weekly Petroleum Status Report for the final week of June showed U.S. crude production increased 88,000 barrels per day (bpd) to 9.338 million bpd, near a two-year high of 9.35 million bpd seen for the week-ended June 16. U.S. oil production is nearly 1.0 million bpd higher than a year ago and 1.37 million bpd above their five-year average.

So far this year, oil production has risen 568,000 bpd, and is 641,000 bpd higher than when the Organization of the Petroleum Exporting Countries agreed in November 2016 to reduce their production by 1.2 million bpd effective Jan. 1, with the deal now extended through March 2018. Production by Russia and nine other non-OPEC producers has also been cut in coordination with OPEC.

Rising U.S. production plus recovery in Libyan and Nigerian production have offset the OPEC-led production cuts.

Earlier in the session, oil futures rallied after both the EIA and American Petroleum Institute reported bigger-than-expected stock draws for crude and gasoline, with implied demand also strong.

EIA's data showed crude oil supply plunged 6.3 million barrels (bbl) to a 502.9 million bbl during the final week of June, cutting a year-over-year surplus to 9.2 million bbl, or 2%, while 104.3 million bbl above their five-year average.

Gasoline supply fell 3.7 million bbl and distillate fuel stocks tumbled 1.8 million bbl, EIA reported, while demand increased by 167,000 bpd for gasoline and by 293,000 bpd for distillate fuels. Refinery crude inputs, a proxy for crude demand, rose 251,000 bpd to 17.14 million bpd, as refineries ramped up operations by 1.1% to 93.6% for the week.

Analyst Cooper said most hedge funds are still bearish despite recent rallies and cited Andy Hall, one of the well-known bullish investors who expressed concerns that market oversupply would keep oil prices under pressure for a while. Morgan Stanley bank also warned U.S. production will have to drop more before oil prices can recover.

NYMEX August West Texas Intermediate crude futures settled 39 cents higher at $45.52 bbl, of a session high of $46.53. IntercontinentalExchange September Brent futures settled 32 cents higher at $48.11 bbl, easing off a session high of $49.18.

August ULSD futures edged up 0.34 cent to $1.4819 gallon at settlement, moving off an intraday high of $1.5096. August RBOB futures rallied 2.63 cents to $1.5287 settlement, having traded to a one-month high of $1.5417.

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