Oil Futures End Mixed

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures ended mixed Thursday afternoon with West Texas Intermediate and Brent crude on the Intercontinental Exchange selling off from better-than-three-year highs to lower settlements after President Donald Trump backed a strong U.S. dollar.

Trump said at the World Economic Forum in Davos, Switzerland, that the dollar would only get stronger, contradicting his Treasury Secretary Steven Mnuchin who triggered a rout in the dollar with his comments on Wednesday welcoming a weak dollar.

An unwritten rule among past treasury secretaries has been to talk up the U.S. currency, even though a weaker dollar may be advantageous for American businesses exporting goods abroad. Mnuchin's comments took the market by surprise, analysts said.

The dollar is the world's reserve currency, often trading inverse to oil futures. Oil trades in the international market in dollars.

Trump's comment had an immediate impact in the currency market, triggering a rebound for the dollar, although it traded back to where it was on Wednesday. The greenback had traded down to a three-year low versus a basket of six major currencies this morning.

"[Crude] is selling off because the dollar is rallying back up hard after [President] Trump said he wants a strong dollar, and that Mnuchin was misunderstood," said analyst Phil Flynn at Price Futures Group in Chicago.

NYMEX March WTI crude oil futures settled 10 cents lower at $65.51 per barrel (bbl), falling off a $66.66 high. The ICE March Brent settled down 11 cents at $70.42 bbl, reversing off a $71.28 high. The NYMEX February ULSD futures contract settled up 0.93 cent at $2.1154 gallon, off a $2.1264 near-three-year spot high. February RBOB futures settled 0.10 cent lower at $1.9154 gallon, after trading to a $1.9314 gallon nearly five-month spot high.

In early trade, oil futures rallied with Brent. At one point, Brent surged above $71 bbl for the first time since Dec. 3, 2014, with support from a weakening dollar, tightening global crude supplies and a 10th straight weekly decline in U.S. crude inventories.

On Wednesday, the Energy Information Administration showed crude oil stocks declined in the week-ended Jan. 19 by 1.1 million bbl to a 411.6 million bbl better-than-2-1/2-year low. Crude stocks at Cushing, Oklahoma, the delivery point for NYMEX WTI, tumbled 3.15 million bbl to a 39.244 million bbl three-year low.

The steep stock decline at Cushing came as U.S. Gulf Coast refiners drew on the supply at the hub, while oil flow into Cushing from Canada through Keystone pipeline remains restricted, said Flynn. A report Tuesday by Genscape showed crude oil movement on the Keystone at 20% of capacity.

The Cushing stock draw is a key reason the Brent/WTI spread has shrunk to the lowest level since last September, with spot-month Brent trading at a $4.70 bbl premium to WTI this afternoon.

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