RBOB Futures Opens Higher on Stock Draw

NEW YORK (DTN) -- New York Mercantile Exchange oil futures were mixed at the open Wednesday morning with the August RBOB contract trading near a seven-week high. Meanwhile August West Texas Intermediate crude oil and ULSD contracts were little changed as traders recalibrated expectations in front of weekly data from the Energy Information Administration due out at 10:30 AM ET.

The recalibration follows a weekly oil report Tuesday by the American Petroleum Institute that surprised the market, showing an unexpected U.S. crude oil stock build of 1.6 million bbl, and stock draws of 5.45 million bbl and 2.89 million bbl for gasoline and middle distillates, respectively, for the week-ended July 14.

The market expected a draw of 3.0 million bbl for crude, and builds of 1.0 million bbl and 1.5 million bbl for gasoline and distillates fuels, respectively. The API report boosted the entire oil futures complex in overnight trade but especially RBOB futures, while WTI and ULSD gave up their premarket gains.

The market will also scrutinize data on U.S. crude oil production. For the week-ended July 7, crude production rose by 59,000 bpd to a 9.397 million bpd fresh two-year high, up 910,000 bpd year-on-year, according to EIA.

At 9:00 AM ET, the August WTI futures contract was flat at $46.40 bbl while September contract was down a penny at $46.75 bbl after inside trade.

The August WTI contract expires at the close of regular trade Thursday afternoon, so traders are expected to square their positions today and tomorrow.

IntercontinentalExchange September Brent crude futures contract was up 6cts at $48.90 bbl after inside trade.

The August ULSD futures contract was 0.73cts higher at $1.5177 gallon. The August RBOB futures contract climbed 1.83cts to $1.5964 gallon, off a near seven-week spot high of $1.5994 and trading at a 3.88cts premium to the September contract. Backwardation is a bullish price structure, and in this case it reflects improvement in seasonal gasoline demand.

On Tuesday, the futures complex rallied on speculations 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 United States its prior role as the swing producer.

Saudi Arabia, which reported raising its oil production by 190,000 bpd in June to 10.07 million bpd, is the driving force behind the 15-month pact 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.

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