Oil Futures Post Fresh Multi-week Lows

Oil Futures Post Fresh Multi-week Lows

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled at multi-week lows Thursday afternoon after worries about building U.S. crude oil inventory and crude production combined with another plunge in the stock market and a stronger dollar.

The Energy Information Administration on Wednesday showed crude output rose 332,000 bpd to a 10.251 million bpd record high last week, 1.273 million bpd above the comparable week a year ago. The previous record high was achieved in November 1970 at 10.044 million bpd.

On Tuesday, EIA projected in its monthly short-term Energy Outlook that U.S. crude production would average 10.6 million bpd this year and 11.2 million bpd in 2019.

The EIA followed its monthly report with weekly data showing a 1.9 million bbl crude stock build to 420.3 million bbl during the week-ended Feb. 2, while supplies of gasoline and distillates up 3.4 million bbl and 3.9 million bbl, respectively.

The Dow Jones Industrial Average plunged more than 1,000 points or 4.15% and S&P 500 Index was down more than 100 points of 3.75% at the close, with the U.S. dollar rising to a fresh two-week high. A stronger dollar is bearish for oil futures.

This is the second time in a week the Dow has plunged more than 1,000 points. The Dow is so far down 10.4% from its late January peak, but from a very high level after relentless rallies over the past year. The market correction was triggered last Friday by a U.S. jobs report that showed 2.9% growth in wages year-on-year in January, raising expectations for higher inflation that might prompt the Federal Reserve to aggressively hike its key short-term interest rates.

"I think oil is following the stock market on concerns about inflation," said analyst Phil Flynn at Price Futures.

The weakness in oil futures this week follows rallies in January to three-year highs for West Texas Intermediate crude, ULSD and Brent crude futures on the intercontinental Exchange. The NYMEX RBOB contract had also traded at its highest point since Hurricane Harvey slammed the Texas coastline in August 2017.

Record high bullish positions in WTI futures by noncommercial traders exposed the market to this week's steep selloff.

NYMEX March WTI crude futures settled down 64cts at $61.15 bbl, and has since traded at a $60.27 five-week spot low. Support is marked at $57.08. April Brent crude oil on ICE settled 70cts lower at $64.81 bbl, and has since traded at a six-week spot low of $64.10.

NYMEX March ULSD futures eased 1.0cts to settle at $1.9213 gallon, and has since traded at a $1.9045 seven-week spot low. March RBOB futures inched down 0.10cts to a $1.7650 gallon settlement, and posted a seven-week spot low of $1.7456 in after-hours trade.

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