WTI Settles at Three-week Low

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures closed down across the board this afternoon. West Texas Intermediate crude oil contract posted the lowest settlement in three weeks amid a strengthening U.S. dollar and higher domestic crude oil production.

"People are concerned about the dollar, tariffs and U.S. production," said analyst Phil Flynn at Price Futures. "But there's also a report of the sale of 7.0 million barrels from the Strategic Petroleum Reserve to one Gulf Coast refinery."

The U.S. Department of Energy’s Office of Fossil Energy today announced a notice of sale of up to 7.0 million bbl of crude oil from the Strategic Petroleum Reserve, which will fulfill requirements for section 404 of the Bipartisan Budget Act of 2015 and section 158 of the Bipartisan Budget Act of 2018.

The dollar index rose to a four-day high, while equities were little changed despite the fact that President Donald Trump today signed a proclamation for tariffs on imported steel and aluminum.

There was no market panic because the tariffs were already priced in and the proclamation was less stringent than previously thought. Trump imposed a 25% tariff on imported steel and 10% on aluminum effective in 15 days, but with temporary exemptions to Canada and Mexico as NAFTA talks continue. Australia is also being considered for exemption because it’s a key U.S. trading partner.

On fundamentals, the Energy Information Administration's latest data shows U.S. crude oil production rose last week by 86,000 bpd to a 10.369 million bpd record high, 450,000 bpd higher than seen at the end of January and up 1.281 million bpd from a year ago.

U.S. crude production is expected to reach 10.7 million bpd this year and 11.3 million bpd next year, according to EIA's monthly report released on Tuesday. This would make the U.S. the world's biggest producer, overtaking Saudi Arabia and Russia and offsetting production cuts by the Organization of Petroleum Exporting Countries and their 10 partners.

NYMEX April WTI crude oil futures settled down $1.03 at $60.12 bbl, off a $59.95 intraday low. Intercontinental Exchange May Brent crude dropped 73cts to $63.61 bbl settlement, off a $63.43 four-day low. The Brent premium to WTI rose to a $3.49 one-week high.

NYMEX April ULSD futures settled 1.55cts lower at $1.8591 gallon, while April RBOB futures tumbled 4.26cts to $1.8677 gallon.

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