Bullish Oil Data Powers Futures Higher

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled mixed on Wednesday with West Texas Intermediate crude and ULSD futures powered higher by a raft of bullish data, with U.S. government agency reporting a massive drop in weekly U.S. gasoline stockpiles and the International Energy Agency revising its global oil demand forecast, as well as suggesting the global market is moving towards rebalancing.

"The Energy Information Administration's report suggests refineries will need a lot of crude barrels to replace that kind of refined oil product inventory draw we saw," said Phil Flynn, an analyst at Price Futures, adding, "Combine that with the fact that every major reporting agency has raised their demand forecast and you see why the [crude oil] market is higher today [Wednesday]."

EIA's Weekly Petroleum Status Report showed U.S. commercial crude oil stockpiles increased by 5.9 million bbl, the second straight weekly crude stock build since mid-June, to 468.2 million during the week-ended Sept. 8, reducing the year-over-year deficit to 2.5%.

The report showed stock draws of 8.4 million bbl for gasoline and 3.2 million bbl for distillates for the week, beating market estimates for stock draws of 3.0 million bbl each for gasoline and distillates. Suggesting the severe impact of Hurricane Harvey on Gulf Coast refining runs more than two weeks ago, the EIA report shows the biggest one-week gasoline stock draw in a quarter century, and at 218.3 million bbl total gasoline supply is at the lowest level since late 2015.

"This seems to be a one-time off plunge for gasoline stocks, so it was priced in already and that's why RBOB futures ended lower," said Flynn. Others agreed.

"This week's [report] obviously was still heavily influenced by the storms, as will next week's report, and thus, no long term analysis will be effected, other than the refinery capacity note, will be altered the next couple of weeks," said analyst Kyle Cooper at ION Energy in Houston.

Earlier, the IEA raised its global oil demand forecast and reported a supply decline in August globally and by the Organization of the Petroleum Exporting Countries. The bullish IEA report supported oil futures, especially Brent futures on the IntercontinentalExchange. In its Oil Market Report for September, Paris-based IEA, which acts as the coordinator of energy policy for Organization for Economic and Cooperation Development countries, revised global demand 100,000 bpd higher for 2017 due to strong second quarter oil demand, especially in OECD countries.

Global oil demand during the second quarter surged 2.3 million bpd or 2.4% versus a year ago, the report said. For the year 2017, IEA raised its forecast for world consumption by 100,000 bpd to 97.7 million bpd, reflecting an annual growth rate of 1.6 million bpd.

Global oil supply was down in August for the first time in four months with OPEC crude oil production falling last month for the first time in five months.

Global supply fell by 720,000 bpd in August to 97.7 million bpd due to unplanned outages and scheduled maintenance, mainly in non-OPEC countries, while OPEC production fell 210,000 bpd from a 2017 high to 32.67 million bpd in August as compliance with their production cuts agreement improved.

NYMEX October WTI crude oil settled $1.07 higher at $49.30 bbl, near a $49.40 one-week high. November Brent crude on the ICE platform gained 89cts to $55.16 bbl at settlement, edging off a near five-month high on the spot continuation chart at $55.21, with the Brent premium to WTI easing 18cts to $5.86 bbl.

NYMEX October ULSD futures settled 2.79cts higher at $1.7685 gallon. October RBOB futures were also near flat, settling down 0.90cts at $1.6473 gallon. The October RBOB contract ended at a 4.7cts premium to the November contract, indicating heightened short-term demand.

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