Oil Futures Up on Bullish Products

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 higher after trending lower initially. This came following the release of weekly supply data from the Energy information Administration, which showed a surprise increase in commercial crude oil inventories amid increased gasoline demand and reduced distillate supplies.

EIA data showed U.S. commercial crude inventories increased 1.5% or 5.8 million bbl to 441.1 million bbl during the week ended July 13, besting earlier supply projections from the American Petroleum Institute predicting a 629,000 bbl build. At the same time, demand for gasoline increased 433,000 bpd to 9.708 million bpd, while stocks dropped 3.2 million bbl to 235.8 million bbl. EIA reported distillate demand up 336,00 bpd to 4.141 million bpd, while production fell 268,000 bpd to 5.174 million bpd.

Analysts said more bullish data was found that in stocks of crude at the Cushing, Oklahoma supply hub -which is used as the delivery point for the West Texas Intermediate crude contract- declined for a ninth straight week to 24.858 million bbl from 25.718 million bbl the week prior.

U.S. crude production reached 11.0 million bpd, the first time ever, EIA said.

"I think it is a combination of factors causing futures prices to rise with the market reading that the increase in (crude) supply is based on some temporary issues," said Phil Flynn, senior market analyst with Chicago-based Price Futures Group. "We saw a decrease in exports while imports increased which will tend to work themselves out, but overall, the demand numbers for gasoline and bullish distillate inventories decided to turn the market around."

Flynn also mentioned Wednesday's emergency meeting of the Organization of Petroleum Exporting Countries as somewhat bullish for the market.

"OPEC said it's going to stick to production cuts at the moment," he said. "They're holding together despite the upcoming November sanctions on Iran and have said that they won't dip below 100% compliance."

As of November 4, renewed oil sanctions go into effect on Iran, after the United States pulled out of the 2015 Iran nuclear accord in May. The International Energy Agency said in their monthly Oil Market Report released July 12 that Iranian crude exports declined by 230,000 bpd in June from May, "as European purchases dropped by nearly 50%."

At the 2:30 PM settlement, NYMEX August West Texas Intermediate crude futures settled 68 cents bbl higher at $68.76 bbl, while ICE September Brent crude futures settled 74 cents bbl higher on the day to $72.90 bbl, though still its lowest price in more than three months. August RBOB gasoline futures rose 1.83 cents gallon to $2.044 gallon, and the August ULDS contract gained 2.02 cents gallon to $2.0903 at settlement.

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