Oil Futures at Fresh Highs

Oil Futures at Fresh Highs

NEW YORK (DTN) -- Spot-month oil futures on the New York Mercantile Exchange settled at fresh three-week highs, clawing their way back up after initial weakness. Traders focused on tightening domestic oil market following midweek statistics showing another steep draw in crude oil supply and strong refinery runs, which suggests good demand for crude in the United States.

The market came under pressure initially on news the Forties pipeline may be back up in January, which would be sooner than anticipated, but the [EIA] inventory data we saw Wednesday was still very supportive, BP CEO Bod Dudley questioned whether U.S. shale oil production will increase going forward. I think that’s bullish,” said analyst Phil Flynn at Price Futures.

The 450,000 bpd Forties line is the largest of the four main North Sea crude oil streams that underpin Brent, a benchmark oil marker. The line was shut on Dec 11 after a crack was found at a section near Aberdeen, Scotland. Operator Ineos said earlier today that they expect an early January restart.

Onn the domestic front, the Energy Information Administration’s oil report for the week-ended Dec. 15 showed a 6.5 million bbl crude stock draw down to 436.5 million bbl, nearly 49 million bbl or 10.1% lower than a supply on-hand a year ago. Refinery runs climbed 0.7% to 94.1% of operable capacity and crude utilization rose 111,000 bpd to 17.1 million bpd.

Overall, total commercial petroleum inventories tumbled 14.2 million bbl last week while total products supplied over the last four-week period, a proxy for demand, averaged 20.3 million bpd, up 2.6% from the same period last year. Domestic production declined for both gasoline and distillates last week, and distillates inventories are 16.1% lower than a year earlier.

Flynn also said the $1.5 trillion tax overhaul that passed both houses of Congress on Wednesday could add as much as 500,000 bpd in oil demand because individuals and corporations who will get tax cuts would use the money to crude oil and a variety of fuels.

NYMEX February West Texas Intermediate crude futures settled up 27cts at $58.36 bbl, off a more than one-week high of $58.38 and the highest settlement since Dec. 1. February Brent crude futures contract on the Intercontinental Exchange were 34cts higher at $64.90 bbl settlement, off a $64.93 better than one-week high, trading at a $6.54 premium to WTI, the highest premium in over a week.

NYMEX January ULSD futures settled marginally higher, up 0.60cts at $1.9502 gallon after inside trade but the highest settlement since Nov. 28. January RBOB futures settled 1.23cts higher at $1.7476 gallon, near a better than one-week high of $1.7517 and the highest settlement in three weeks.

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