OLD BRIDGE, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and spot-month Brent crude on the Intercontinental Exchange settled sharply lower Wednesday following the release of bearish supply data from the Energy Information Administration that included a large and unexpected increase in commercial crude inventories that pushed stocks above the five-year average for the first time since early June and the crude contracts to multi-month lows.
EIA data for the week-ended Aug. 10 showed crude stocks rose 6.8 million barrels (bbl) that ran contrary to market expectations for a 2.9 million bbl draw, lifting stocks to a 414.2 million bbl six-week high and about 5.0 million bbl above the five-year average.
Included in the crude build was a 1.6 million bbl increase at the Cushing supply hub to 23.4 million bbl, the first increase in 13 weeks that lifted stocks slightly above minimum operating levels estimated somewhere between 16.0 and 22.0 million bbl. There was concern the low supply level at the Oklahoma tank farm, which serves as the delivery location for the West Texas Intermediate futures contract, could prompt lifting restrictions.
The supply build prompted WTI calendar spreads to narrow, while widening the spread with the Brent contract to a seven-week high Brent premium at $5.75 bbl at settlement.
NYMEX September WTI futures settled down $2.03 at $65.01 bbl, trimming a loss to a $64.51 two-month low on the spot continuous chart, while ICE October Brent ended down $1.70 at $70.76 bbl, settling near a $70.30 better-than-four-month spot low.
The sizeable increase in crude inventories came partly on a 1.083-million-barrel-per-day (bpd) jump in imports to 9.014 million bpd, the third highest import rate of 2018, and despite a near record high in U.S. refiner demand at 17.981 million bpd. U.S. refinery utilization during the week profiled jumped 1.5% to a 20-year high at 98.1% of installed capacity.
The high processing rate was one of the components lifting distillate stocks a more-than-expected 3.6 million bbl to a 129.0 million bbl 4-1/2 month high, with distillate production up 100,000 bpd on the week to a 5.337 million bpd five-week high. Gasoline stocks declined a less-than-expected 700,000 bbl to 233.1 million bbl.
Implied gasoline demand was up 166,000 bpd to 9.512 million bpd, although down 100,000 bpd or 1.0% during the four weeks ended Aug. 10 at 9.646 million bpd. Distillate fuel supplied to market slipped 44,000 bpd to 3.959 million bpd, while on a four-week basis through Aug. 10 is down 377,000 bpd or 8.7% at 3.935 million bpd.
"The demand levels for distillates are concerning if you're a bull," said David Thompson, executive vice president of Washington, D.C.-based Powerhouse, a commodity hedge and trade advisory. "Some of this may be the result of a stronger dollar decreasing the export appetite, and obviously worries over tariffs causing a decline in GDP."
U.S. distillate exports slid 185,000 bpd to a 1.043 million bpd three-month low for the week reviewed, and below the five-year average at 1.182 million bpd. In index trading, the U.S. dollar was holding near a 13-month high.
NYMEX September ULSD futures settled down 3.83 cents at $2.0904 gallon, holding support at $2.0722 with a $2.0760 one-month spot low. NYMEX September RBOB futures settled 3.67 cents lower at $1.9974 gallon, holding above Monday's $1.98 gallon four-month low on the spot continuous chart.
Brian Whary can be reached at firstname.lastname@example.org
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