Oil Edges Higher Thursday

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures opened slightly higher Thursday morning before turning mixed, powered by strong demand for refined oil products and a tightening domestic market, with the upside limited by production increases by the Organization of the Petroleum Exporting Countries.

September NYMEX RBOB futures seesawed in premarket trade amid technical pressure and profit taking. Andy Lipow of Lipow Oil Associates in Houston notes peak demand for gasoline has only a month left, with U.S. Labor Day on Sept. 4 this year, while available supply is adequate. Gasoline demand in the United States consistently declines in September from August.

On Wednesday, the Energy Information Administration reported total gasoline inventories dropped 2.5 million bbl to 227.7 million bbl during the week-ended July 28, 13.75 million lower than a year ago.

The data showed crude oil stocks fell 1.5 million bbl during the week to a 481.9 million bbl seven-month low, down 10.0 million bbl versus a year ago. That draw was accompanied by a sharp increase in refinery crude inputs to 17.4 million bpd, up 556,000 bpd from a year ago and above the five-year average.

Implied demand for gasoline increased by 21,000 bpd to a record high 9.842 million bpd last week, 0.9% higher than a year ago, while implied demand for distillate fuels are 15% higher than a year ago at 4.14 million bpd.

"While the headlines were bullish, the details were much less so," said analyst Kyle Cooper at IAF Advisor in Houston.

Based on media surveys, OPEC production probably rose in July despite a 15-month agreement to cut the cartel's output by 1.2 million bpd through March 2018. The rise in output was partly due to Libyan production climbing 180,000 bpd to 1.025 million bpd.

Libya had telegraphed their plan to raise oil output as far back as last summer, so this should not have come as a surprise, said analyst Tim Evans at Citi Futures in New York.

In early trade, NYMEX September West Texas Intermediate crude futures were 32cts higher at $49.96 bbl. October Brent crude oil futures on the IntercontinentalExchange were 41cts higher at $52.77 bbl.

September ULSD futures edged up 0.29cts to $1.6617 gallon and September RBOB futures nudged up 0.57cts to $1.6505 gallon. The September RBOB contract's premium to the October contract remains sizable near 11.0cts.

NYMEX oil products futures have since reversed down.

Looking ahead to Friday, the oil market will consider the July payroll report from the Department of Labor due out at 8:30 AM ET and the weekly rig-count report scheduled for release by Baker Hughes, Inc. at 1:00 PM ET.

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