Oil Futures Shallowly Mixed Before EIA

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures were shallowly mixed Thursday morning, seesawing on either side of Wednesday's settlement values ahead of the 11 a.m. EST release of weekly oil supply data by the U.S. Energy Information Administration.

The EIA's Weekly Petroleum Status Report, delayed a day by the Christmas Day holiday on Monday, follows a bullish reading on weekly U.S. crude supply released late Wednesday by the American Petroleum Institute. The API repo ended Dec. 22, which included a 1.27 million bbl stock draw at the Cushing hub in Oklahoma, the delivery point for NYMEX West Texas Intermediate crude futures.

The market expected a crude draw of 3.75 million bbl nationwide with 500,000 bbl of the decline estimated at Cushing. If the draws are confirmed by the more comprehensive data set from the EIA, this would be the sixth straight weekly crude draw nationwide.

U.S. crude stocks were drawn down 11.6 million bbl in the two weeks ended Dec. 15, EIA data shows, and at 436.5 million bbl total crude stocks were down nearly 49.0 million bbl versus a year ago. The tightening domestic crude supply has been one of the bullish factors in support of the oil futures complex recently.

The API also reported stock builds of 3.1 million bbl and 2.8 million bbl for gasoline and distillate fuels, respectively, versus estimates for stock draws of 1.75 million bbl for both products.

The API data was bearish on products, although analysts noted this supply data covers a week before arctic weather hit a swath of the country, with U.S. Midwest and Northeast regions experiencing a record-breaking snowstorm this week. The Northeast is experiencing freezing cold, which is forecast to continue through the New Year holiday and should boost heating demand.

The market will also keep watch over domestic crude oil production, which during the week ended Dec. 15 rose 9,000 bpd to a 46-year high of 9.789 million bpd, up 1.0 million bpd versus a year ago. U.S. output increases partly offset the 1.8 million bpd in oil production cuts by the Organization of the Petroleum Exporting Countries that began in January and is set to continue through December 2018.

The oil futures complex is coming under pressure from an announcement Thursday morning by Forties crude pipeline operator that oil flows on the line should reach normal levels by Jan. 1. Operator Ineos said repairs on the line are complete, and it has lifted all restrictions on the flow of oil and gas from North Sea platforms feeding into the 450,000 bpd Forties Pipeline System, with the expected return to normal flow rates by New Year's Day earlier than initially announced.

The Forties pipeline was shut on Dec. 11 after a crack was discovered near Aberdeen, Scotland. Forties is the biggest of the four crude streams flowing into Brent, accounting for 40% of the volume for the international crude price marker. In Libya, the al-Zouk pipeline that transports oil to Es Sider export terminal is expected to restart next week. The one-week shutdown has led to a shut-in of 85,000 bpd of oil supply, according to reports.

The pipeline outages in Libya and the North Sea have supported oil prices in recent days, sending NYMEX West Texas Intermediate crude and Brent crude on the Intercontinental Exchange to 2-1/2 year highs on Tuesday.

In early trade, NYMEX February WTI crude futures were 6cts lower at $59.58 bbl while ICE February Brent crude futures were up 4cts at $66.48 bbl, with the trans-Atlantic crude arbitrage at $6.90 bbl. March Brent was down a penny at $65.98 bbl.

NYMEX January ULSD futures were up 0.87cts at $2.0489 gallon. January RBOB futures were 0.55cts lower at $1.7860 gallon.

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