Oil Advances in Thursday Morning Trade

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures advanced Thursday morning on several features, including U.S. data issued on Wednesday showing weekly stock draws for gasoline and distillate amid strong demand, a bullish outlook by Goldman Sachs, and a survey showing high compliance by members and nonmembers of the Organization of the Petroleum Exporting Countries with their production cuts in January.

The Energy Information Administration for the week-ended Jan. 26 showed stock draws of 2.0 million bbl for gasoline and 1.9 million bbl for distillate versus the week prior while down 15.0 million bbl and nearly 33.9 million bbl, respectively, versus a year prior.

The draws coincided with increased demand for gasoline, up 347,000 bpd to 9.0 million bpd, and distillates, which surged 623,000 bpd to 4.5 million bpd. Over the last four weeks, gasoline product supplied averaged about 8.8 million bpd, up 7.1% from year prior, and distillate fuel product supplied averaged about 4.2 million bpd, up 13.3% from a year ago.

While total commercial crude stocks rose for the first time in 11 weeks, up 6.8 million bbl to 418.4 million bbl, supply at the key Cushing supply depot in Oklahoma, the delivery hub for West Texas Intermediate futures, dropped 2.224 million bbl to 37.020 million bbl from 39.244 million bbl.

This morning, Goldman Sachs raised its three-month average price forecast for Brent crude to $75 bbl from last month's forecast at $62 bbl, and hiked WTI's three-month price outlook to $65.63 from $54.93, saying the global oil market has probably rebalanced. Goldman expects a global oil supply deficit of 200,000 bpd in 2018

In addition, a Reuters' survey showed compliance with the OPEC-led supply agreement edged up to 138% in January from 137% in December, suggesting the parties to the agreement are still committed even as WTI and Brent crude oil prices have rallied to levels not seen since late 2014. The OPEC and non-OPEC deal calls for 1.8 million bpd in output cuts through December, though Saudi Arabia and Russia recently said they could prolong the supply agreement into 2019.

In early trade, NYMEX March ULSD futures gained 2.10cts to $2.0874 gallon following the expiration of the February contract on Wednesday. March RBOB futures climbed 1.01cts to $1.9038 gallon after the February contract expired a day prior.

NYMEX March WTI crude was up 63cts at $65.36 bbl while April Brent crude on the Intercontinental Exchange advanced 66cts to $69.55 bbl after the March contract expired Wednesday.

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