Oil Near Flat as USD Stabilizes

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures traded near flat Friday morning after coming off overnight lows as the U.S. dollar steadied near a better than one-week high, while equities moved gained amid risk-on trade.

While the dollar is trading near Thursday's 10-day high, the Dow Jones Industrial Average traded more than 100 points higher and S&P 500 index traded up 15 points, building on the prior day's gains.

The oil futures complex and the dollar have an inverse trading relationship. The stock market and oil also have a correlative trading relationship, with equities seen as a barometer for investor sentiment. The stock market has been volatile this week on inflation concerns. The market will also focus Friday on a report by Houston-based oil services firm Baker Hughes that's expected to show a rise in the number of active oil rigs in the United States this week.

Oil futures rallied Thursday to two-week highs after the U.S. Energy Information Administration detailed crude oil and distillate fuel stock draws, and a modest build in gasoline supply.

EIA's data showed total commercial petroleum inventories fell 7.9 million bbl last week, while total products supplied over the last four-week period, a proxy for demand, averaged 20.6 million bpd, up by 4.3% from the same period last year.

A 515,000 bpd rise in domestic gasoline production was partly offset by a 288,000 bpd drop in imports of the fuel, the EIA showed. An unexpected 322,000 bpd plunge in production of distillate fuels led to the weekly inventory draw, offsetting a 177,000 bpd decline in exports and a 7,000 bpd boost in imports.

The report also showed crude production little changed, easing 1,000 bpd from a 10.271 million bpd record high the week prior to 10.27 million bpd last week. That data led some analysts to speculate that domestic output may be leveling off.

However, domestic crude production last week was up 1.269 million bpd versus a year ago, and a recent monthly EIA report projected output would average 10.6 million bpd this year.

Overseas, crude exports from Organization of the Petroleum Exporting Countries are expected to decline by 240,000 bpd to 24.31 million bpd during the week-ending March 10, tanker tracker Oil Movements said on Thursday. The sailings are seen 1.51 million bpd lower than the comparable week a year ago.

At last look, NYMEX April West Texas Intermediate crude futures were down 3cts at $62.74 bbl while ICE April Brent crude futures were unchanged at $66.39 bbl. NYMEX March RBOB futures flat at $1.7662 gallon and March ULSD futures was 0.29cts lower at $1.9498 gallon.

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