Oil Futures Settle Lower

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled lower on Wednesday afternoon amid selling pressure from Energy Information Administration's data showing U.S. crude production increased to a fresh record high last week.

"The market definitely concerned about rising shale production that drove the WTI selloff," said Andy Lipow, president of Lipow Oil Associates. "The crude stock build was however smaller than expected."

EIA today reported U.S. crude oil production increased by 86,000 barrels per day (bpd) during the week ended March 2 to 10.369 million bpd, up 1.281 million bpd from a year ago.

That production growth came on the heels of EIA's Short-term Energy Outlook released Tuesday that adjusted up its U.S. crude production estimate from a month ago. The agency projected domestic output growing this year at a 1.4 million bpd year-on-year rate to 10.7 million bpd, which would be the highest on record. Next year, production is expected to climb to 11.3 million bpd.

Today's weekly EIA report also showed crude oil supply increased by a less-than-anticipated 2.4 million barrels (bbl) to nearly 426.0 million bbl, while gasoline inventories declined by a less-than-expected 788,000 bbl to 251.0 million bbl. EIA said distillate fuel supply dropped a less-than-estimated 559,000 bbl to 137.4 million bbl.

"The crude stock build was bearish as the API data showed, but gasoline draw also wasn't as bullish as people expected, and that may be due to refinery turnaround program underway," said Lipow.

API late Tuesday reported a 5.66 million bbl crude stock build for the week reviewed, while the market expected a 2.75 million bbl build.

Steep early stock market losses following Tuesday's resignation of Gary Cohn from his position as White House economic advisor initially weighed down oil futures. However, major equity indices pared early losses as market concerns about a trade war if President Donald Trump slaps tariffs on imported steel and aluminum faded after U.S. officials said the tariffs would be targeted and certain countries such as Canada and Mexico would be exempt. Trump is expected to announce the tariffs Thursday.

After plunging 350 points earlier in the morning, the Dow Jones Industrial Average has recouped about three-quarters of the losses, heading into the close down less than 100 points. In currency trade, the U.S. dollar weakened to a two-week low.

NYMEX April West Texas Intermediate crude futures settled down $1.45 at $61.15 bbl, off a three-day low at $60.58. Intercontinental Exchange May Brent crude was down $1.45 at a $64.34 bbl settlement. NYMEX April ULSD futures settled 2.87 cents lower at $1.8746 gallon while April RBOB futures dropped 2.28 cents to $1.9103 gallon at settlement.

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