WTI Settles at 7-Week High

NEW YORK (DTN) -- New York Mercantile Exchange oil futures advanced Wednesday afternoon. West Texas Intermediate crude and Brent on the Intercontinental Exchange settled at seven-week highs on the back of U.S. oil stock draw downs, a weakening U.S. dollar and heightened geopolitical risk to supply from Iran.

"The weekly oil report was bullish overall as it showed 6.9 million bbl total petroleum stock decline and demand at over 20 million bpd...although exports were down, which is something to watch," said analyst Kyle Cooper at IAF Advisors in Houston. "Gasoline demand should increase ahead of the summer peak driving season."

Despite showing domestic crude production rising for the fifth straight week to a 10.4 million record high, the Energy Information Administration detailed crude inventories falling during the week-ended March 16 by 2.6 million bbl, while gasoline stockpiles declined 1.7 million bbl and distillate supplies tumbled 2.0 million bbl.

On demand, the agency reported refinery crude inputs climbed 410,000 bpd to 16.777 million bpd as runs increased 1.7% to 91.7% of operable capacity. Implied demand climbed 85,000 bpd to 3.9 million bpd for distillates while down 318,000 bpd to 9.32 million bpd for gasoline.

Globally, geopolitical risk has heightened after a meeting Tuesday between President Donald Trump and Saudi Arabian Crown Prince Mohammed bin Salman.

The two leaders reportedly discussed countering the influence of Iran in the oil-rich Middle East region, with speculation mounting that Trump might decertify the Iran nuclear deal. Such a move would effectively withdraw the U.S. from the deal and lead potentially to more sanctions and curtailment of Iran's oil exports.

Equities rose after Federal Reserve Jerome Powell's comments at a news conference after the central bank announced a quarter-point hike in key interest rates, pushing the federal funds rate up from 1.5% to 1.75%, with analysts saying he hit the right tone by neither being too dovish nor too hawkish.

The Fed raised its economic growth forecast for the U.S. Powell said the economic outlook has strengthened in recent months, while the unemployment rate is expected to remain low. Inflation remains below the Fed's 2% objective.

Despite the rate hike, the dollar index fell to a one-month low Wednesday afternoon, with a weaker dollar boosting oil futures. At settlement, NYMEX May WTI crude oil futures rose $1.63 to $65.17 bbl, and ICE May Brent rallied $2.05 to a $69.47 bbl settlement.

NYMEX April ULSD futures spiked 5.42cts to $2.0037 gallon at settlement, a seven-week spot high settlement. April RBOB futures climbed 4.63cts to $2.0122 gallon, settling above $2.00 gallon for the first time since August 2017 when Hurricane Harvey was lashing the Texas coastline. Wednesday's settlement is only the second time the spot month contract has settled above $2.00 gallon since July 2015.

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

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