Oil Futures Tumble Lower

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled lower across the board Wednesday amid pressure from a report by the Energy Information Administration showing unexpected stock builds for refined oil products and weak demand.

"The market was led lower by gasoline because inventories for the fuel increased due to weak demand, which may be due to the fact that people didn't drive much over the Thanksgiving holiday," said Andy Lipow, president of Lipow Associates in Houston.

The Weekly Petroleum Status Report for the week-ended Nov. 24 showed gasoline and distillate stockpiles rose 3.6 million bbl and 2.7 million bbl, respectively. Implied demand for gasoline fell by 871,000 bpd last week while down 3.9% versus a year ago. Demand for distillates dropped 175,000 bpd last week, but rose 1.1% versus a year ago.

"Gasoline and distillate had bearish builds and that definitely tempers the bullishness of the report overall," said Kyle Cooper, an analyst at IAF Advisors.

EIA reported a 3.4 million bbl crude oil stock decline for the week as refinery runs surged 1.3% to a 92.6% rate of operable capacity. Higher refinery runs means more production of refined products, which, in turn, adds selling pressure on the futures complex.

Domestic crude oil production increased again last week, rising 24,000 bpd to a fresh 46-year high of 9.682 million bpd, and up 983,000 bpd versus a year earlier.

The market now awaits the results of a summit set for Thursday by the Organization of the Petroleum of Exporting Countries and their non-OPEC producer partners in Vienna, with the market expecting the producers to extend their 1.8 million bpd in supply cutbacks through December 2018. The current agreement is due to expire in March 2018.

"What comes out of OPEC tomorrow (Thursday) will be big news," said Lipow. "The question is whether or not they extend the production cuts and for how long. The market has been long in anticipation of the deal to extend the cuts, so if the cuts are not going to last long then we'll have a selloff tomorrow. Anything short of a nine-month extension will be very disappointing."

NYMEX January West Texas Intermediate crude oil futures settled 69cts lower at $57.30 bbl, off a one-week low of $56.75. January Brent crude lost 50cts to $63.11 bbl settlement on the Intercontinental Exchange in front of its expiration Thursday (11/30). The February Brent contract was 71cts lower at $62.53 bbl.

In products trade, December ULSD futures tumbled 2.86cts to $1.9221 gallon settlement, off a $1.9144 one-week low, with the January contract down 2.91cts at $1.9238 gallon. December RBOB futures settled 4.11cts lower at $1.7309 gallon after posting a one-week low of $1.7277, with the January contract falling 3.47cts to $1.7339 gallon.

The NYMEX December RBOB and ULSD futures contracts also expire Thursday afternoon.

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