Oil Futures Advance on Large Crude Draw

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and Intercontinental Exchange Brent futures advanced in early trading Wednesday, supported by a report from the American Petroleum Institute released late Tuesday afternoon detailing a larger-than-expected drawdown in commercial crude stocks in the United States for the first week of December.

In midmorning trading Wednesday, Nymex January WTI added to Tuesday's advance, gaining $0.88 to $52.53 barrels (bbl), while ICE February Brent rose $1.02 to $61.22 bbl. Nymex January ULSD futures were up 2.29 cents at 1.8700 gallon and January RBOB futures gained 2.25 cents to $1.4623 gallon.

According to API, domestic crude supplies in the United States dropped 10.18 million bbl during the first week of December. Gasoline stocks were reported down 2.484 million bbl against an expected build, with distillate inventory down a less-than-expected 712,000 bbl.

The Energy Information Administration will publish its supply report at 10:30 AM ET.

Earlier this morning, the Organization of the Petroleum Exporting Countries released their Monthly Oil Market Report with upside revisions to the projections for non-OPEC production this year, but reduced expectations for output from non-OPEC countries in 2019. Data details that non-OPEC supply for this year up 190,000 barrels per day (bpd) from month prior for annual growth of 2.5 million bpd and supply at 60.03 million bpd. OPEC's MOMR shows upward revisions in output volumes from the United States and Canada and an overall increase in fourth quarter supply of 500,000 bpd driven mainly by Russia.

In their MOMR, OPEC revised down non-OPEC oil supply in 2019 from month prior by 80,000 bpd for annual growth of 2.16 million bpd and supply at 62.19 million bpd. OPEC said the adjustment was primarily due to Canada's decision to mandate production cuts in 2019 to clear excess inventory, "as well as downward supply forecast adjustments for the 10 non-OPEC participants in the Declaration of Corporation in the first half of 2019."

In 2019, the United States, Brazil, Russia and the United Kingdom are expected to drive growth in non-OPEC supply, while sizeable output declines projected for Mexico and Norway.

On the consumption side, OPEC left unchanged expected world oil demand for both this year and in 2019 with annual growth of 1.5 million bpd or 1.5% in 2018 to 98.70 million bpd, and by 1.29 million bpd to 100.08 million bpd in 2019. This year's growth in global oil demand is led by the United States, up 410,000 bpd or 2.0% to 20.68 million bpd, and China, up 390,000 bpd or 3.2% to 12.71 million bpd.

On Tuesday, EIA revised projections for the global oil production higher for 2018 and lowered its production forecast for 2019, while global oil consumption is expected to grow at a faster rate in 2019 than previously projected which brings world oil production and consumption nearly to balance according to their Short-term Energy Outlook released Tuesday afternoon.

The EIA indicates global oil production would average 100.42 million bpd this year, and 101.84 million bpd in 2019, revised down 300,000 bpd from 102.14 million bpd forecasted last month.

EIA sees oil production from OPEC at 39.21 million bpd this year, adjusted up 10,000 bpd from month prior, and at 38.32 million bpd in 2019 for a 47,000 bpd downside revision.

Non-OPEC oil production is expected at 61.20 million bpd in 2018, up 2.46 million bpd from 2017 and 211,000 bpd above their outlook in November. For 2019, non-OPEC oil production is projected at 63.52 million bpd that represents year-on-year growth of 2.32 million bpd, while adjusted up 160,000 bpd from month prior.

"Crude oil production from the world's three largest producers -- the United States, Russia, and Saudi Arabia -- were at or near record levels in November," said EIA

In other news, equity and oil markets were supported this morning by comments from U.S. President Donald Trump that he would intervene in the case against the Huawei executive arrested in Canada on a request from the United States for alleged violations of U.S. sanctions against Iran, provided China cooperates with the United States on trade policy. The technology company has been scrutinized by western countries that believe it spies for Beijing.

Liubov Georges can be reached at Liubov.Georges@dtn.com