Oil Futures Settle Higher
NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled at fresh two-week highs for West Texas Intermediate crude and Brent on the IntercontinentalExchange on Wednesday, while RBOB and ULSD futures rallied to the highest levels since the start of June after the Energy Information Administration reported massive stock draws for petroleum inventories in the United States.
The EIA's report for the week ended July 14 showed domestic crude oil stocks declined by a more-than-expected 4.7 million bbl to a total of 490.6 million bbl, the lowest since the week ended Jan. 20 though refinery runs eased 0.5% to 94%.
The report also showed gasoline supply unexpectedly declined by 4.4 million bbl during the week reviewed despite a 2.0% decline in implied demand, while distillates stocks tumbled 2.1 million bbl as implied demand for the fuel increased by 476,000 bpd or over 12%.
The EIA report was considered bullish, especially for crude, compared to a report issued Tuesday by the American Petroleum Institute that showed a crude stock build of 1.6 million bbl for the week ended July 14.
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"[This is] another very bullish headline report as all three categories reported draws, said analyst Kyle Copper at IAF Advisors in Houston.
The EIA also indicated that U.S. crude output increased 32,000 bpd to 9.429 million bpd, the highest level since July 2015, which analyst Cooper saw as a bearish factor. However, it was notable that crude oil inventory held in the Strategic Petroleum Reserve was drawn down for a 21st straight week.
Despite the U.S. stock draw, global inventories remain bloated, with output from Libya and Nigerian on the rise. A Libyan oil official said Wednesday that the country aims to produce 1.25 million bpd by the end of the year and 1.5 million bpd by the end of 2018, up from current 1.1 million.
Libya is exempt from the 15-month agreement by the Organization of Petroleum Exporting Countries and their 10 non-OPEC producer partners to reduce production by 1.8 million bpd from January 2017 to March 2018.
On Tuesday, the futures complex rallied on speculation Saudi Arabia was considering a further unilateral cut to its oil production, a move that would raise expectations the kingdom would wrestle back from the U.S. its prior role as the swing producer.
At settlement, the August WTI futures contract was 72cts higher at $47.12 bbl, off a $47.26 two-week high, while September contract rose 73cts to $47.32 bbl. The August contract expires Thursday.
The September Brent crude futures contract settled up 86cts at $49.70 bbl, off a two-week spot high of $49.81.
The August ULSD futures contract jumped 4.10cts to $1.5514 gallon at settlement. The August RBOB futures contract rallied 3.80cts to $1.6169 gallon, moving off a better than six-week high of $1.6205 and traded at a 3.85cts premium to the September contract.
George Orwel can be reached at george.orwel@dtn.com
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