Oil Mixed in Wednesday Morning Trade

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures were shallowly mixed on Wednesday morning as the market mulled over the American Petroleum Institute's mixed weekly oil supply report and the restart of Libya's Sharara oilfield after a two-day shutdown.

The API late Tuesday reported a larger-than-expected 2.1 million bbl crude oil stock build at the Cushing terminal in Oklahoma and a 4.2 million bbl build for gasoline stocks during the week-ended Sept. 29.

The two data-points pressured West Texas Intermediate crude and RBOB futures during overnight trade, although WTI's downside was limited by other API data showing a bigger-than-expected 4.1 million bbl total crude stock draw for the week reviewed.

The API also reported an unexpected 584,000 bbl stock draw for middle distillates, which provided support for ULSD futures, although analysts said the market still wants to see seasonal demand improving during the shoulder months.

"This report is a mixed bag since total crude stock draw was bigger than expected, but it was offset by the Cushing stock build," said analyst Phil Flynn at Price Futures. "The increase in gasoline stocks is a matter of concern because it shows demand is slowing a bit. The draw for distillates is so small and so we need to see bigger draws because we are in the shoulder month."

The Energy Information's weekly oil report is due at 10:30 AM ET, and traders will scrutinize crude production data since rising U.S. crude output has been putting pressure on oil prices.

Globally, Libya's 230,000-bpd Sharara oilfield restarted this morning after it was shut down by local militia on Sunday. Libyan production is expected to increase to 1.0 million bpd later this week from 800,000 bpd, said National Oil Corp. Chairman Mustafa Sanalla.

Libya is exempt from a deal by the Organization of the Petroleum Exporting Countries and 10 non-OPEC producers including Russia to cut output by 1.8 million bpd through March 2018. The producers have been discussing extending the supply cuts to June or December 2018. Media surveys showed OPEC supply rose in September.

The latest decline in oil prices has refueled the talk about extending the cuts. Russian President Vladimir Putin this morning said he was not opposed to the extension and Iranian oil minister Bijan Zanganeh said OPEC members want to do everything necessary to stabilize the oil market.

In early trade, NYMEX November West Texas Intermediate crude contract was little changed, 2cts lower at $50.40 bbl and continues to test support at $50.31. The contract posted a two-week spot low of $49.91 during overnight trade.

December Brent crude futures on the Intercontinental Exchange was also little changed, easing 4cts to $55.96 bbl as the contract continues to challenge support at $55.92. The Brent premium over WTI was roughly flat at $5.56 bbl.

NYMEX November ULSD futures gained 1.12cts to $1.7617 gallon while November RBOB futures were fractionally lower at $1.5653 gallon.

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