Oil Futures Gain on Expected Stock Draw

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures were higher Wednesday morning. West Texas Intermediate crude is at a 2-1/2 year high above $61 bbl on a combination of expected oil stock draws in the United States, severe cold in the Northeast and geopolitical risks linked to an uprising in Iran. That could impact oil supply should the situation intensify and heightened tension between the U.S. and North Korea.

A survey of analysts shows expectations of a nearly 5.0 million bbl crude oil stock draw for the week-ended Dec. 29, which would be the seventh straight weekly draw for U.S. crude stocks. As of the week-ended Dec. 22, U.S. crude stocks were 11.1% lower than the level seen a year earlier. Crude stocks at Cushing supply hub in Oklahoma is estimated to have declined by 2.0 million bbl during the week reviewed.

The American Petroleum Institute’s weekly oil statistics are due out this afternoon, with the Energy Information Administration set to issue its weekly oil report on Thursday.

On the geopolitical front, weeklong anti-government protests in Iran have spread to other cities across the nation. A counter-protest was held today in support of the clerical leadership in Tehran. U.S. officials including President Trump and the U.S. ambassador to the United Nations have voiced their support for the protesters.

Analysts said the turmoil in Iran could escalate to the point where it begins to impact the country’s oil production or exports, particularly if oil workers join the uprising, said analysts. According to the December Oil Market Report by the Organization of the Petroleum Exporting Countries, Iran self-reported that they produced 3.878 million bpd of crude oil in November, while secondary sourced data showed a 3.818 million bpd in output.

In addition, Trump today threatened North Korea with nuclear war, saying in a tweet that he has a bigger and more powerful nuclear button that works. The tweet was an apparent response to the New Year statement from North Korean leader, who said the U.S. is now within the range of their potential nuclear attack.

NYMEX ULSD futures continue to be supported by severe wintry weather conditions that have boosted heating demand. On the heels of freezing weather in the Northeast over the past week, a winter snowstorm warning is now in effect in New York and other states along the East Coast, with 6 to 12 inches of snow expected in some areas.

The Southeast is getting pummeled and the snowstorm is expected to move further up the coast to the Northeast, the nation’s biggest heating oil market. A blizzard conditions are possible in New Jersey, New York, and Connecticut, according to the National Weather Service.

At last look, NYMEX February WTI crude futures nearly $1 higher near $61.25 bbl, trading near a new 2-1/2 year spot high of $61.30. March Brent crude oil futures contract on ICE platform were about 75cts higher near $67.35 bbl, near a $67.44 2-1/2 year spot high, with Brent’s premium to WTI little change over $6 bbl.

NYMEX February ULSD futures were 1.0cts higher near $2.0690 gallon while NYMEX February RBOB futures gained 3.0cts to near $1.7940 gallon.

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