Oil Futures Settle Wednesday Mixed

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled mixed Wednesday afternoon, with West Texas Intermediate crude falling for the second straight session and pulling down ULSD futures with it after headline figures by the Energy Information Administration showed a surprise crude oil stock build and another surge in domestic crude production.

The oil futures complex seesawed during the session, rising in early afternoon trade after trading weaker overnight amid profit-taking following the recent rally that pushed the complex to multi-month highs at the start of this week. "It was a wild ride in the market, but the truth is the market was overbought, and technically what we saw today was profit-taking when the EIA's headline number showed crude stock build," said analyst Phil Flynn at Price Futures in Chicago. "We came in today with so many long positions."

Others agreed.

"You could say it was profit-taking, but we also saw crude production exceed 9.6 million bpd for the first time since EIA started keeping the records, which is 1983," said Andy Lipow, president of Houston-based Lipow Oil Associates. "Distillates [prices] were dragged down by crude."

The EIA's Weekly Petroleum Status Report for the week-ended Nov. 3 showed U.S. crude production rose by 67,000 bpd to 9.62 million bpd, posting another big increase for the second consecutive week and up 928,000 bpd from the corresponding week a year ago.

Analysts fear the relentless increases in domestic production could undermine efforts by the Organization of the Petroleum Exporting Countries to reduce global surplus.

EIA also detailed U.S. crude oil stockpiles unexpectedly increased by 2.2 million bbl instead of an estimated 2.5 million bbl draw while the American Petroleum Institute reported a draw of 1.56 million bbl. The supply increase overshadow a 290,000 bpd increase in refinery crude inputs, a proxy for demand, that was accompanied by a 1.5% increase in refinery runs to 89.6% of operable capacity.

On the bullish side, strong demand helped run down product stocks. The EIA report showed gasoline supply declined by a more-than-expected 3.3 million bbl as implied demand for the fuel increased 35,000 bpd to a strong 9.496 million bpd weekly rate during the week-ended Nov. 3.

Distillate fuel supply tumbled 3.4 million bbl as demand spiked 952,000 bpd. The strong distillate demand was seasonally driven, although the fuel supplied averaged 3.9 million bpd over the last four weeks, down 2.9% year-on-year.

Chinese trade data showing oil imports slowed in October added downward pressure on the oil futures complex. China's crude oil imports fell 18% to a one-year low rate of 7.34 million bpd in October, down from about 9.0 million bpd in September.

"Year-on-year crude oil imports growth slowed, most likely because of slower growth in imported crude processing by independent refiners as they exhaust their import quotas for the year," said Barclays bank in a note to clients commenting on China's trade data, although they also noted that China's product demand remains strong.

NYMEX December WTI crude futures settled 39cts to $56.81 bbl, off a 28-month high of $57.92. January Brent on the Intercontinental Exchange was 20cts lower at $63.49 bbl settlement, trading at a $6.68 bbl premium to WTI, which is close to the recent 2-1/2 year high.

Products were little changed, with NYMEX December ULSD futures settled 0.03cts lower at $1.9216 gallon while December RBOB futures settled up 0.60cts at $1.8213 gallon.

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