Oil Futures Mixed on Crude Build

OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled mixed Thursday following a surprise build in U.S. commercial crude oil inventories, which weighed on West Texas Intermediate. Meanwhile gasoline stocks were drawn down on strong demand for the motor transportation fuel.

Weekly supply data from the Energy Information Administration showed commercial crude oil inventories rose 1.2 million bbl to 417.9 million bbl during the week ended June 29 that follows three consecutive drawdowns that had pulled 20.0 million bbl of supply from stocks during the first three weeks of June. Despite the modest build, current inventories are 16.9% or 85.0 million bbl less than during the same week a year ago, EIA said.

EIA also reported gasoline stocks fell 1.5 million bbl to 239.7 million bbl, with implied demand up 137,000 bpd for the week ended June 29 to 9.869 million bpd, near the early June record high of 9.879 million bpd. With gasoline supplies down 1.5 million bbl on the week and imports off 340,000 bpd to 648,000 bpd, August RBOB gasoline settled 1.17 cents higher on the day to $2.1293, paring an advance to a $2.1508 gallon three-session high.

NYMEX August ULSD futures gained 1.45 cents gallon at settlement to $2.1787, trimming a move to a $2.2022 gallon two-day high, after EIA reported implied distillate demand jumped 514,000 bpd to 4.126 million bpd.

EIA also said distillate stocks edged up 100,000 bbl to 117.6 million bbl, although 32.9 million bbl or 21.8% above the comparable year-ago period. Al Levine, CEO and Chairman of Washington, D.C.-based Powerhouse, a commodity hedge and trade advisory, has raised concern over expected tightness in the distillate market, especially during the heating season later this year.

NYMEX August West Texas Intermediate crude futures slid $1.20 on the day to settle at $72.94 bbl, and well below Tuesday's 3-1/2 year spot high at $75.27 bbl. ICE September Brent crude futures, which settled 48 cents higher Wednesday at $78.24 bbl, settled down 85 cents Thursday at $77.39 bbl.

Thursday's down day for crudes come despite a Reuters report that Iran has threatened to close the Strait of Hormuz if U.S. President Donald Trump doesn't relent from calls to allies and others to end their oil imports ahead of a Nov. 4 deadline for re-imposed U.S. sanctions against the country. Praising Iranian President Rouhani's "firm stance" against the United States, Reuters reported the head of the Revolutionary Guards said Thursday forces were ready to block the strait, which links the Persian Gulf to the open sea.

Reuters reported that the U.S. Navy stands ready to ensure free navigation and the flow of commerce in the strait following the threat. Few expect Iran to be successful in disrupting the flow of oil supplies through the strait should it follow through with its threat, as previous attempts have yielded limited results.

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