Steep Crude Stock Draw Lifts WTI

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled mixed with an upside bias Wednesday afternoon, with September West Texas Intermediate crude oil and ULSD boosted by bullish federal data showing draws for petroleum inventories while demand increased during the week ended August 4.

"While there was geopolitical uncertainty about North Korea, at the end of the day the market closed higher because fundamentals are getting better," said analyst Phil Flynn at Price Futures. "The big drawdown in crude stocks and the record high refinery runs gave the bulls an edge, and even though gasoline demand pulled back, it's still at a high level."

The Energy Information Administration's weekly oil report showed total commercial petroleum inventories dropped 4.6 million bbl in the week ended Aug. 4 while total products supplied over the last four-week period averaged over 21.2 million bpd, up 2.3% versus the same period last year.

Also, the data showed crude oil stocks plunged 6.5 million bbl to a 475.4 million bbl 9-1/2-month low, 3.6% year-on-year deficit. It was accompanied by a 166,000 bpd surge in refinery crude inputs, a proxy for demand, as refinery runs jumped 0.9% to a 12-year high of 96.3%.

Total U.S. oil production eased 7,000 bpd to 9.423 million bpd, but was due to a drop in Alaska with lower 48 production at the highest level in two years.

The agency also reported gasoline stockpiles increased by 3.4 million bbl while distillate fuel supply was drawn down by 1.7 million bbl. The gasoline data was somewhat bearish as demand for the fuel eased 45,000 bpd last week, but is 0.3% higher year-on-year.

"The gasoline build was due to a build in blending components that we had expected over the last couple of weeks," said analyst Kyle Cooper at ION Energy in Houston. "Distillate demand was stronger than expected and thus the larger drop. Gasoline and distillate output rose despite a 64,000 bpd reduction in refinery capacity. Overall, a bullish report."

Concerns about global supply overhang and a surge in production by the Organization of Petroleum Exporting Countries limited the upside for WTI and ULSD futures.

September WTI crude futures settled 39cts higher at $49.56 bbl and October Brent on the IntercontinentalExchange climbed 56cts to a $52.70 bbl settlement. September ULSD futures settled up 2.41cts at $1.6533 gallon, reversing off a better than one-week low of $1.6128. September RBOB futures contract settled down fractionally at $1.6200 gallon.

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

(BE)