Oil Futures End Near Highs Thursday

OLD BRIDGE, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and the spot-month Brent contract on the Intercontinental Exchange settled near session highs amid strong demand, and ahead of Friday's reading for second quarter U.S. gross domestic product, with annualized growth expected at a robust 4.2%.

Gains in oil products outpaced the advance by crude, with West Texas Intermediate testing the $70 per barrel (bbl) psychological barrier with a $69.92 intraday high and Brent $75 bbl with a $74.83 session high.

Strong demand led by gasoline that prompted supply drawdowns in mid-July boosted the RBOB and ULSD contracts, with the Energy Information Administration on Wednesday reporting total oil products demand at 21.7 million barrels per day (bpd) during the week-ended July 20th -- the second highest weekly demand rate in 2018.

Wednesday's EIA data was also bullish for crude, reporting U.S. commercial crude inventories were drawn down a larger-than-expected 6.1 million bbl to a 404.9 million bbl 3-1/2-year low for the weekly period. Of that decline, 1.127 million bbl was drawn from the Cushing tank farm in Oklahoma, which was the tenth consecutive weekly decline at the hub, reducing stocks to a minimum operating level at 23.7 million bbl or 30.3% of working capacity.

Globally, Wednesday's attack of two Saudi-owned very large crude carriers in the Bab al-Mendeb Strait in the Red Sea by Houthi rebels lent upside support for crude futures. Saudi Arabia said it was temporarily suspending oil shipments through the strait because of the attacks, with Saudi Arabia oil exports expected to flow through a Saudi-owned alternative East-West pipeline.

EIA data shows an estimated 4.8 million bpd of crude and oil products run through the Bab al-Mendeb Strait, which is located at the southern mouth of the Red Sea.

Saudi Arabia leads a coalition in Yemen to oust the Houthis. The Houthis have support from Iran, although Tehran denies a relationship. The Houthis, who have previously threatened to block the strait, claim they had the naval capability to hit Saudi ports and other Red Sea targets.

NYMEX September WTI futures settled up 31 cents at $69.61 bbl, with ICE September Brent gaining 61 cents to a $74.54 two-week high. NYMEX oil products futures also settled at two-week highs, with August RBOB up 3.92 cents per gallon to $2.1623 and August ULSD up 2.57cts at $2.1769 gallon.

ICE September Brent crude and NYMEX August RBOB and ULSD futures expire at Tuesday's July 31 close.

The Bureau of Economic Analysis will issue its U.S. second quarter GDP estimate at 8:30 a.m. EDT Friday.

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