NYMEX Settles at Multi-Week Lows

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled at multi-week lows Wednesday afternoon following a report from the Energy Information Administration showing big stock builds for oil products that stirred concern over short-term demand.

"The distillates production was at a record high because refineries are running like crazy," said analyst Phil Flynn at Price Futures. "It's not good when production exceeds demand. The demand numbers today are disappointing. So overall, the build in products stocks overwhelmed everybody and raised concerns about demand."

EIA reported that gasoline supply spiked by 6.8 million bbl to 220.9 million bbl in the week-ended Dec. 1, nearly five times the expected 1.4 million bbl build, but lower than the 9.2 million bbl build reported by the American Petroleum Institute late Tuesday.

Middle distillate fuels supply unexpectedly increased 1.7 million bbl to 129.4 million bbl, as output of the fuel surged 118,000 bpd to 5.402 million bpd.

The crude oil data was mixed, however, with the agency reporting a stock draw of 5.5 million bbl to 220.9 million bbl nationwide, more than an expected crude stock decline of 3.75 million bbl. Domestic crude oil production rose again, up 25,000 bpd to a fresh 46-year high of 9.707 million bpd, the data showed.

"Clearly, the product builds are bearish of cracks and the higher distillate output is also bearish," said analyst Kyle Cooper at IAF Advisors. "Gasoline exports fell and gasoline demand declined. U.S. oil production continues to climb and is now above 9.7 million bpd and will continue to advance."

Relentless increases in U.S. crude output is seen as an impediment to efforts by the Organization of the Petroleum Exporting Countries and their 10 nonmember producer allies to eliminate excess global supply. The producers last week extended their production cuts of 1.8 million bpd to December 2018. The supply agreement was initially scheduled to end in March 2018.

The market is now on the lookout for compliance with the agreement, with OPEC's official compliance data available in its Monthly Oil Market Report due next week. Two separate surveys by Reuters and Bloomberg on Tuesday showed OPEC production fell last month to five-month lows.

At settlement, NYMEX January West Texas Intermediate crude oil futures contract was down $1.66 to $55.96 bbl, off a $55.87 two-week low. ICE February Brent crude dropped $1.64 to $61.22 bbl, off a $61.13 three-week spot low.

NYMEX January ULSD futures plummeted 5.26cts to $1.8613 gallon after posting $1.8602 four-week spot low. January RBOB futures sank 5.75cts to $1.6609 gallon settlement, near a $1.66 fresh six-week low on the spot continuation chart.

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