Oil Settles Shallowly Mixed

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled shallowly mixed Tuesday afternoon with West Texas Intermediate crude and ULSD a tad lower. Meanwhile RBOB edged higher as concerns over rising U.S. production offset an upward adjustment in the outlook for global oil demand and a supply draw down.

The International Energy Agency's Oil Market Report released Tuesday heralded a steep decline in commercial oil inventory held by the Organization for Economic Cooperation and Development in 2017, which erased 154 million bbl of supply above their five-year average to 52 million bbl last year.

However, IEA also warned that higher U.S. output would offset that draw. The Paris-based energy watchdog said U.S. producers have sharply reduced costs and are enjoying a second wave of growth so extraordinary that their increase in liquids production in 2018 could equal global demand growth.

Last week, Energy Information Administration reported U.S. crude oil output jumped 332,000 bpd to a 10.25 million bpd record high during the week-ended Feb. 2, up 1.3 million bpd year-on-year. For all of 2018, EIA's Short-term Energy Outlook revised up production by 300,000 bpd to 10.6 million bpd, with output projected at 11.2 million bpd next year. These EIA projections were bolstered by today's IEA report that said U.S. oil production is now challenging output from Russia and Saudi Arabia, the number one and two largest oil producers, respectively. At 4:30 PM ET, the American Petroleum Institute will release its oil data for the week-ended Feb. 9, with EIA's weekly report due out Wednesday morning.

A DTN survey estimates a U.S. crude stock draw of 500,000 bbl for the week-ended Feb. 9, while gasoline and distillate fuel supply are expected to have been drawn down by 750,000 bbl and 1.0 million bbl, respectively.

NYMEX March WTI crude futures settled down 10cts at $59.19 bbl while ICE April Brent crude was up 13cts at $62.72 bbl. While WTI and Brent are in backwardation, the calendar spreads for both Brent and WTI narrowed. Brent closed at a $3.53 bbl premium to WTI.

NYMEX March ULSD futures settled 0.2cts lower at $1.8369 gallon, off $1.8169 gallon 3-1/2 month low on the spot continuation chart. March RBOB futures was up 0.68cts at $1.6853 gallon, moving off a $1.6519 two-month spot low.

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