Oil Ends Lower on Profit-taking

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled lower Friday amid profit-taking following Thursday's multiyear highs for West Texas Intermediate and Brent futures on the Intercontinental Exchange. ULSD futures eased on expectation for warmer weather over the coming days that will curb demand for heating oil in the snow-inundated U.S. Northeast region, the nation's biggest heating oil market, while the RBOB contract was pressured lower by softer demand as an East Coast snowstorm limited travel this week.

"This was a selloff based on profit-taking and we also saw pressure on products because this cold weather had limited impact on refinery runs, and now the market is looking ahead to the coming week," said Houston-based Andy Lipow, president of Lipow Oil Associates.

"It's just a correction in the market today [Friday] because the weather system is showing warmer conditions next week," said analyst Doug Quigley at ABN AMRO in New York.

Brent futures rallied earlier in the week partly due to the weeklong unrest in Iran that raised concerns about potential disruptions to oil production and exports from the oil producing country. WTI futures were supported by Energy Information Administration's data released Thursday showing a more-than-expected 7.4 million bbl plunge in U.S. commercial crude oil inventories during the week-ended Dec. 29 to 424.5 million bbl, down 54.5 million bbl or 11.4% from a year ago.

The seventh straight weekly U.S. crude stock draw was tied to higher refinery runs, which spiked 1.0% to a better than 12-1/2 year high of 96.7% of operable capacity, with the utilization rate well above the 92.2% five-year average for the comparable week.

On Thursday, Brent and WTI settled at three-year highs.

However, the market turned its focus to moderating weather forecasts and on data showing U.S. crude output rose last week by 27,000 bpd to 9.782 million bpd, up 1.012 million year-over-year, near a mid-December 47-year high.

The crude output increase and the expected moderating weather offset the latest report Friday by Baker Hughes showing the number of active rigs drilling for oil in the United States declined five in the first week of January to a seven-week low at 742, up 213 versus the year prior.

NYMEX February WTI crude oil futures settled 57cts lower at $61.44 bbl, while up $1.02 versus a week ago. ICE March Brent crude oil futures fell 45cts to a $67.62 bbl settlement and gained 75cts on the week.

In products trade, the NYMEX ULSD futures contract for February delivery settled 1.83cts lower at $2.0587 gallon, losing 1.68cts on the week. The NYMEX February RBOB futures contract fell 2.09cts to $1.7858 gallon at settlement, down 1.20cts on the week.

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