Bearish EIA Data Press Oil Futures Down

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures tumbled for the fourth straight day Wednesday, with West Texas Intermediate crude oil settling at the lowest level in four weeks after the U.S. Energy Information Administration reported stock builds for crude, gasoline and distillate fuel.

In addition, EIA reported domestic crude production climbed to a record high of more than 10.0 million bpd in the week ended Feb. 2, raising the prospects of further oil futures selling.

The data showed crude output soared 332,000 bpd to 10.251 million bpd last week, up 1.273 million bpd year-on-year. Domestic production peaked in 1970 at 10.044 million bpd.

"[This] may be the largest week-on-week increase that was not tropical storm related in history," said analyst Kyle Cooper at IAF Advisors. "Overall, a bearish report as exploration and production companies continue to display."

Analysts speculate U.S. crude output could top 11.0 million bpd sooner than initially expected.

On Tuesday, EIA's Short-Term Energy Outlook revised up expected U.S. crude oil production by 300,000 bpd from January to 10.6 million bpd this year for year-on-year growth of 1.3 million bpd. In 2019, U.S. oil output is forecast to rise to an average of 11.2 million bpd, revised up 400,000 bpd from month prior, for year-on-year growth of 600,000 bpd.

EIA's weekly report today detailed a 1.9 million bbl crude stock build to 420.3 million bbl for the week ended Feb. 2, which falls short of an estimated 2.75 million stock increase but below a draw of 1.0 million bbl reported by the American Petroleum Institute late Tuesday.

Supplies of gasoline and distillates were up 3.4 million bbl and 3.9 million bbl, respectively, said EIA. The market expected draws of 1.5 million bbl and 2.75 million bbl.

Implied demand for gasoline edged up 66,000 bpd to 9.11 million bbl last week while distillates demand plunged 692,000 bpd to 3.78 million bpd.

"These are bearish data and we have a lot of nervous investors with the stock market so volatile, so they took profits," said analyst Phil Flynn at Price Futures.

The Dow Jones Industrial Average traded within a 500-point range before ending down slightly, again closing below 25,000. The dollar again strengthened, trading at a two-week high this afternoon, with a stronger greenback adding pressure on oil futures.

At settlement, NYMEX March West Texas Intermediate crude futures were down $1.60 at $61.79 bbl, trimming a decline to a $61.25 four-week spot low. April Brent crude oil on the Intercontinental Exchange declined $1.35 to a $65.51 bbl settlement, edging off a near six-week spot low of $65.16. The Brent premium to WTI rose to a $3.72 bbl four-day high.

NYMEX March ULSD futures plunged 5.38cts to $1.9313 gallon settlement, moving off a $1.9245 six-week spot low. March RBOB futures tumbled 3.92cts to $1.7660 gallon at settlement, paring a decline to a six-week low of $1.7535.

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

(BE)