Oil Down Despite Bullish Stats

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures traded on the New York Mercantile Exchange were lower late morning Wednesday. This is despite a mostly bullish slate of supply-demand data released midmorning by the Energy Information Administration, as worry that escalating trade tensions between the United States and China would stunt economic growth and dampen demand for oil pressured the market.

EIA reported an unexpected 4.6 million bbl draw from U.S. commercial crude stocks for the week-ended March 30 that lowered inventory to 425.3 million bbl, down 110.2 million bbl or 20.6% against year prior while below the five-year average for the third consecutive week.

The inventory draw came despite a 27,000 bpd uptick in domestic crude production to a fresh record high of 10.46 million bpd, with output up 968,000 bpd from the first week in the first quarter to the last week.

A big part of the reason for the crude draw was a spike in U.S. crude exports to a 2.175 million bpd record high, while refiners processed the most crude in 2018 last week, 16.936 million bpd, since the first week of the year.

Gasoline stocks were drawn down slightly less-than-estimated at 1.1 million bbl, although the draw was bullish compared with a 1.2 million bbl build reported Tuesday afternoon by the American Petroleum Institute. Gasoline stocks have been drawn down for five straight weeks through the final week in March, following the seasonal trend, and have held below the comparable year-ago inventory total for four consecutive weeks.

Total U.S. commercial oil products supply fell 3.9 million bbl last week to 1.1856 billion bbl, narrowing its surplus against the five-year average to just under 8.0 million bbl. The ongoing drawdown in products inventory comes with strong demand, with U.S. products supplied to market up 301,000 bpd last week to a nearly five-month high of 21.217 million bpd.

Implied demand for U.S. products averaged 20.7 million bpd during the first three months of 2018, 1.07 million bpd or 5.5% above the first quarter 2017 demand pace. U.S. crude and oil products exports surged 427,000 bpd to 6.919 million bpd during the final week of March, a 3-1/2 month high.

NYMEX oil futures pared early losses to two week lows late morning, with May West Texas Intermediate down 55cts near $62.95 bbl after trading at a $62.06 bbl session low. May RBOB futures were down 1.45cts near $1.96 gallon, paring a decline to a $1.9363 low.

May ULSD futures were the loss leader late morning, down 2.25cts near $1.9725 gallon, trimming a decline to $1.9521 gallon low. EIA reported a 500,000 bbl build in distillate supply for last week compared with expectations for a 2.5 million bbl draw, although less than an API reported 2.2 million bbl build.

While trimming early losses, the latest salvo in a growing trade dispute between the United States and China has kept oil futures in the red. Last night, China said it would impose tariffs on 106 U.S. products in response to U.S. tariffs on Chinese imported products valued at $50 billion announced earlier this week by the Trump administration. China has now announced tariffs on 234 U.S. products imported into the country, including ethanol. Last month, the United States imposed tariffs on imported steel and aluminum, although the Trump administration issued waivers to several allies, including the European Union, Brazil, Canada, Mexico and South Korea. China is reportedly sitting on a surplus quantity of steel.

Brian L. Milne can be reached at brian.milne@dtn.com

(BE)

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