Oil Futures Mixed on Demand

OLD BRIDGE, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and front-month Brent crude on the Intercontinental Exchange settled mixed Thursday, consolidating within Wednesday's trade range with the exception of the ULSD contract, as concern over global demand growth paused Wednesday's rally spurred by supply concerns.

"The market is trying to balance concerns about a growing trade war with China against a backdrop of tightening U.S. crude supplies," said Phil Flynn, senior analysts with Chicago-based Price Futures Group.

Midlevel U.S. and Chinese officials met in Washington to discuss trade differences for a second day today even as U.S. tariffs on $16 billion of Chinese goods took effect, with China retaliating with its own tariffs. In July, the U.S. imposed tariffs on $34 billion of Chinese goods.

On Monday, U.S. President Donald Trump indicated he sees little opportunity for talks to yield meaningful results, suggesting July threats to impose up to $200 million in additional tariffs on Chinese goods could be authorized. China has threatened to retaliate with $60 billion in its own tariffs on U.S. goods. The U.S. wants China to address unfair trading practices and the theft of intellectual property.

"We also saw a new report today from Genscape that shows Cushing supplies which have risen the last few weeks could have declined, so those supply declines are a new supportive factor," said Flynn.

On Wednesday, the Energy Information Administration reported a second weekly build in crude stocks at the Cushing tank farm in Oklahoma, with supply up 2.4 millionp barrels (bbl) during the two weeks ended Aug. 17 to 24.218 million bbl after 12 consecutive weekly draws that pressed stocks to minimum operating levels of 21.8 million bbl. Low supply could trigger lifting restrictions at Cushing, the delivery location for NYMEX West Texas Intermediate futures.

NYMEX WTI futures have been in backwardation, a market structure in which the futures contract nearest to delivery trades at a premium to deferred delivery since November 2017. Backwardated markets are a disincentive to store supply.

NYMEX October WTI futures settled flat, down 3 cents, at $67.83 bbl, while ICE October Brent futures declined 5 cents to a $74.73 bbl settlement. NYMEX September RBOB gasoline fell 0.88 cent to settle at $2.0592 gallon, while September ULSD contracts settled up 0.71 cent at $2.1754 gallon, a one-month settlement high on the spot continuous chart.

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