Oil Futures Down on Bearish EIA Data

OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange continued to establish new lows Wednesday following bearish supply data from the Energy Information Administration indicating large across-the-board supply builds and a plunge in demand during the week-ended June 1.

Gasoline supplied to market plunged 713,000 barrels per day (bpd) to 8.976 million bpd during the week, which included the Memorial Day holiday weekend, the kickoff to the U.S. summer driving season. Implied demand for distillate fuels slumped 818,000 bpd to 3.502 million bpd -- the lowest weekly demand rate since mid-October 2017.

The steep drop in demand prompted builds in oil product inventories, with gasoline supply increasing for the third consecutive week, up 4.6 million barrels (bbl) to 239.0 million bbl, the highest inventory rate since late March. Distillate supply rose 2.2 million bbl to a 116.8 million bbl six-week high.

Stephen Schork, president of Villanova, Pa.-based The Schork Report, said demand coming off a holiday is typically lower, noting that today's EIA numbers might be a "one-off."

"When we see the numbers next week there should be a balance," he said.

The supply builds in oil products coincided with strong output from U.S. refiners, which ran 214,000 bpd more crude oil through their units last week than week prior at 17.369 million bpd, with the refinery run rate at 95.8% of capacity the highest weekly rate in 2018.

Despite strong refiner crude demand, nationwide crude inventories increased 2.1 million bbl to 436.6 million bbl on the week, moving above the five-year average for the first time since mid-March.

"Essentially we had a report showing strong demand for crude oil primarily driven by refiners. But supplies of crude and products on a seasonal basis are high which continues to forces prices down," said Schork. "The takeaway from today's EIA report is that from a seasonal perspective this is a very typical report with little to offer the bulls."

NYMEX July RBOB futures slid 3.62 cents to settle at $2.0700 gallon, its lowest settling price on the spot continuous chart since April 18. July ULSD futures slipped 1.5 cents to $2.1266 gallon, the lowest settlement on the spot chart since May 3.

NYMEX July WTI futures settled 79 cents per bbl lower to $64.73, the lowest spot settlement since April 9.

ICE August Brent, fell 2 cents to $75.36 bbl, widening its premium to WTI to $10.63 bbl. Last week, the premium reached a $10.98 bbl 40-month high, as climbing U.S. crude production weighs on WTI futures and production cuts by the Organization of the Petroleum Exporting Countries and 10 non-OPEC oil producing countries including Russia underpin support for Brent, the international crude marker.

Brian Whary can be reached at brian.whary@dtn.com