OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery traded on the New York Mercantile Exchange (NYME) and Brent crude on the Intercontinental Exchange (ICE) continued higher as market participants react to bullish supply data from the American Petroleum Institute (API), indicating a large decline in gasoline inventories and a drop in U.S. crude and distillate stocks. Traders are waiting to see if weekly supply data from the Energy Information Administration (EIA) to be released at 10:30 a.m. ET confirms the API data.
"I think that the market is really going to be focused on EIAs gasoline numbers to see if they confirm the large decline we saw with last night's API data," said Phil Flynn, senior market analysts with Chicago-based Price Futures Group. "If they do, we could be set for a squeeze ahead of the expiration of the August (RBOB) contract next week as supplies on hand have fallen pretty low over the past few weeks. Physical buyers of gasoline may have to pay up because supplies have fallen too quickly."
API said gasoline inventories plunged a seasonally high and larger-than-expected 4.87 million barrel (bbl) last week while distillate inventories dropped 1.32 million bbl. Commercial crude oil inventories declined a larger-than-expected 3.16 million bbl to 407.6 million bbl during the week-ended July 20, with supplies at the Cushing, Oklahoma delivery point down 808,000 bbl.
Last week, the EIA showed U.S. gasoline stocks fell 3.2 million bbl to 235.8 million bbl, while demand rose 433,000 bpd to 9.708 million barrels per day (bpd). Imports were off 196,000 bpd to 657,000 bpd while U.S. production slipped 407,000 bpd on a 413,000 bpd decline in refinery crude inputs.
Prices also are expected to get upside price support following this weekend's heated rhetoric between U.S. President Donald Trump and Iran, with Iran repeating threats to disrupt oil shipments through the critical Strait of Hormuz shipping lanes between Iran and Saudi Arabia, where analysts estimate 30% of world oil supplies flow. Iran has tried this tactic in the past with limited results as the U.S. Navy patrols the key waterway.
Iran remains displeased as it sees its vital crude exports being slashed as countries begin to scale back purchases of Iranian crude under threat of financial punishment from the U.S. ahead of the Nov.4 deadline imposed by the Trump administration following the May pullout from the Iran nuclear accord.
Behind Saudi Arabia and Iraq, Iran is the third largest producing member of the 15-member Organization of Petroleum Exporting Countries (OPEC), with June output at 3.799 million bpd. The International Energy Agency (IEA) reported Iranian crude exports declined by 230,000 bpd in June versus May figures on an estimated 50% decline in purchases out of Europe. Analysts suggest the last round of sanctions from 2012 to 2015 halved Iran's crude exports.
Near 9 a.m. ET, the September NYMEX West Texas Intermediate futures contract was 24 cents higher at $68.76 bbl, while ICE September Brent crude traded 33 cents higher at $73.77 bbl. NYMEX August RBOB gasoline contracts were up 2.07 cents gallon at $2.1163 and the August ULSD contract rose 1.55 cents to $2.1481 gallon.
Brian Whary can be reached at firstname.lastname@example.org
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