Oil Higher in Thursday Trade

NEW YORK (DTN) -- New York Mercantile Exchange oil futures advanced Thursday morning, with West Texas Intermediate posting a new three-year high, boosted by data from the Energy Information Administration released Wednesday showing a drop in crude oil production and a drawdown in U.S. crude stockpiles to a 2-1/2 year low last week.

The agency reported domestic crude production fell 290,000 bpd to 9.492 million bpd last week, down from a 47-year high reached in mid-December at 9.789 million bpd. The production decline was more than expected by several analysts.

The weekly data came a day after EIA's Short-term Energy Outlook for January was issued on Tuesday (1/9), with EIA forecasting U.S. production would average a record high of 10.3 million bpd in 2018, up 1.0 million bpd from 2017.

In its weekly report, EIA showed crude oil stockpiles fell for the eighth straight week through Jan. 5, down 4.9 million bbl to a 2-1/2 year low of 419.5 million bbl while 63.6 million bbl or 13.2% lower versus year prior. Since Nov. 10, domestic crude supply has been drawn down 39.5 million bbl or 9.4%.

Refinery crude inputs, a proxy for crude demand, declined 285,000 bpd to average 17.3 million bpd, 1.3% higher on the year, with refineries operating at 95.3% of their operable capacity, down from a 12-1/2 year high of 96.7% for the prior week, said EIA.

The weekly report also showed gasoline stockpiles rose 4.1 million bbl to 237.3 million bbl last week while 3.2 million bbl lower on the year. Distillate supplies added 4.3 million bbl last week while down 26.9 million bbl or nearly 16% on the year. Demand increased 164,000 bpd for gasoline and 67,000 bpd for distillates.

On the geopolitical front, President Donald Trump is set to review the Iran nuclear deal by Friday. If Trump orders sanctions on Tehran that limits oil production or exports, it could have a bullish effect on the oil futures complex, said analysts.

At 9:00 AM ET, NYMEX February WTI futures were 31cts higher at $63.88 bbl, and has since trade at a $64.65 three-year high on the spot continuous chart. March Brent crude futures on the ICE platform were little changed at $69.22 bbl.

NYMEX February ULSD futures edged up 0.97cts to $2.0904 gallon, trading near the highest level since February 2015. February RBOB futures edged up 0.17cts at $1.8344 gallon.

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