Oil Futures End Mixed

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures ended shallowly mixed Monday with West Texas Intermediate crude and Brent crude on the Intercontinental Exchange higher on risks to Middle East oil supply and expectations U.S. crude oil inventories continued to draw down last week.

RBOB futures eked out a modest gain amid talk of strong crack spreads that suggest demand remained strong despite recent widespread snowstorms along the heavily populated East Coast that hampered travel, while ULSD futures ended down as heating demand is expected to ease amid moderating weather after last week's deep freeze.

At settlement, NYMEX February WTI crude oil futures were 29cts higher at $61.73 bbl while ICE March Brent crude oil futures edged up 16cts to $67.78 bbl. NYMEX February ULSD futures slid 1.33cts to $2.0454 gallon and February RBOB futures settled 0.60cts higher at $1.7918 gallon.

Phil Flynn, senior market analyst with Price Futures, said he expects demand for heating to stay strong, adding that Monday's losses for ULSD futures were temporary.

"The heating oil market is down only because people are unwinding positions and we expect this week's data to show more imports, but in the medium term the market remains firm," Flynn said.

Kyle Cooper, an analyst at IAF Advisors in Houston, agreed, saying, "refiners cranked up runs" and increased production of distillate fuels and gasoline. He said recent data showing massive stock builds for refined oil products reflect supplies were held back at the end of 2017 to avoid year-end tax on inventories.

A survey of analysts showed U.S. crude oil stocks are estimated to have been drawn down by 4.75 million bbl during the week ended Jan. 5. If confirmed by the Energy Information Administration on Wednesday (1/10), it would be the eighth straight weekly U.S. crude oil stock draw.

The survey estimates crude oil supply at Cushing, Oklahoma, delivery hub for NYMEX WTI futures declined by 2.0 million bbl during the week reviewed. EIA's data for the final week of 2017 showed total crude oil inventories down 7.4 million to 422.5 million bbl while 54.5 million bbl or 11.4% lower than a year ago. During the seven weeks ended Dec. 29, domestic crude stocks declined by 34.4 million bbl or 7.5%, as refinery runs surged. The refinery runs spiked 1.0% to a better than 12-1/2 year high of 96.7% in the week ended Dec. 29.

In the Middle East, ongoing protests in Iran coupled with the recent detention of 11 princes in Saudi Arabia have heightened geopolitical risk. Also, an Iranian oil tanker remains on fire and could explode after colliding with a cargo ship off the coast of China over the weekend that could cause a massive oil spill.

Separately, reports indicate U.S. President Donald Trump is likely to announce additional sanctions on Iran, a move that would scuttle the nuclear deal and lead to more tension between Tehran and the United States.

"At the very least such a move could tighten supply," said Flynn.

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