Oil Settles at Two-week Highs

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled at two-week highs Thursday afternoon, rallying across the board following the release of bullish data from the U.S. Energy Information Administration. The data showed an unexpected stock draw for crude, with the upside also lent support by a rally for equities.

"This was an overall bullish report," said Kyle Cooper at IAF Advisors in Houston. "The sizable total U.S. petroleum stock draw did take inventories below their five-year average for the first time since September 26, 2014."

Others agreed.

"Crude production leveled off last week and the crude stock draw did catch many people by surprise because we generally often see builds at this time of the year, so the stock draws show strong demand," said analyst Phil Flynn at Price Futures Group in Chicago. "The numbers were bullish across the board."

EIA's report for the week-ended Feb. 16 showed a 1.6 million bbl draw down in commercial crude inventories to 420.5 million bbl, while a survey estimated crude stocks held steady at the prior week's 422.1 million bbl. Total crude stocks are 98.2 million bbl or nearly 19% below inventory held a year ago.

Crude supply at the Cushing depot in Oklahoma, the delivery location for NYMEX West Texas Intermediate crude futures, was drawn down by a more-than-expected 2.6 million bbl. Crude oil production was down 1,000 bpd at 10.27 million bbl, easing off the prior week's record high. The report also showed distillate supplies drawn down a more-than-expected 2.4 million bbl, while gasoline posted a less-than-expected build of 261,000 bbl for the week reviewed. Year-on-year, gasoline supply is down 7.1 million bbl, while distillate stockpiles are down 26.2 million bbl.

In equities trade, the Dow Jones Industrial Average closed up more than 160 points, with the S&P 500 index little changed but in positive territory. The Dow and S&P have been volatile recently on inflation concerns.

Said Flynn, "The stock market is also back up while bond yields are down. It shows people are less concerned about the economy. In fact, the economy is strong, which is good for demand."

NYMEX April WTI crude futures settled $1.09 higher at $62.77 bbl, off a high of $63.09. Intercontinental Exchange April Brent crude futures climbed 97cts to $66.39 bbl at settlement, off a high of $66.56. NYMEX March RBOB futures settled 0.84cts higher at $1.7657 gallon and March ULSD futures was 2.04cts higher at a $1.9527 gallon settlement.

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