Oil Posts Gains in Thursday Trade

CRANBURY, N.J. (DTN) -- The front month oil contracts traded on the New York Mercantile Exchange and Brent on the Intercontinental Exchange posted modest gains in early trade Thursday following Wednesday's steep declines, with traders positioning in front of weekly oil supply data from the Energy Information Administration following a bearish report against expectations released late Wednesday afternoon by the American Petroleum Institute.

The advance follows employment data released Thursday morning by ADP payroll services that showed the U.S. economy added 163,000 jobs in the private sector in August, below expectations for job growth of 182,000. The ADP report comes ahead of Friday's nonfarm employment report from the Labor Department, with market consensus that there were 195,000 jobs added to the economy in August, above July's 157,000 new jobs. The market also expects the U.S. unemployment rate to decline 0.1% to 3.8%, which would match May's unemployment rate that was the lowest since April 2000.

API reported a smaller-than-expected 1.2 million barrels (bbl) drawdown in U.S. commercial crude stocks for the week-ended Aug. 31 that compared with estimates for a decline between 1.3 million bbl and 2.8 million bbl. The Washington, D.C.-based industry group reported a 631,000 bbl increase in crude stocks at the Cushing tank farm in Oklahoma, which compares with an estimated build of 753,863 bbl by Genscape at the Nymex West Texas Intermediate futures delivery location.

A 1.0 million bbl build in gasoline inventory reported by API for the final week of August ran contrary to market estimates for a decline between 800,000 bbl and 1.8 million bbl. API detailed a 1.8 million bbl build in distillate fuel inventory that was larger than expectations for an increase from 300,000 bbl to 700,000 bbl.

The EIA will publish its weekly report at 11 a.m. ET.

At 9 a.m. ET, Nymex October WTI futures were up $0.23 at $68.95 bbl, with ICE November Brent $0.37 higher at $77.64 bbl. Brent's premium to WTI widened to $8.69 bbl, the largest premium since June 19 as the market considers the number of lost barrel from Iran as U.S. sanctions on Iranian oil exports that take effect on Nov. 4.

Some in the market expect Iranian oil exports to average 1.5 million barrels per day (bpd) in September that compares with exports at 2.3 million bpd in June. ESAI Energy forecasts Iran's oil exports to drop to 1.2 million bpd following the November sanctions.

U.S. President Donald Trump will chair a debate on Iran at the United Nations Security Council on Sept. 26, with Trump said to highlight Iran's military adventurism in the Middle East, Tehran's ballistic missiles program, and its pursuit of an atomic bomb. Analysts don't expect any steps to be taken by the UN, noting the world body has avoided discussing Iran's provocations, and Russia and China hold vetoes in the Security Council.

Nymex October ULSD futures were up 0.75 cents at $2.2420 gallon, with October RBOB futures gaining 1.5 cents at $1.9798 gallon. The RBOB contract reversed off a $1.9550 five-month low on the spot continuation chart, a potential double bottom should the low hold Thursday.

Brian L. Milne can be reached at brian.milne@dtn.com

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