Oil Futures Gain, WTI Slides

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest delivery and the Brent contract on the Intercontinental Exchange advanced on the session but were mixed on the week. The West Texas Intermediate contract registered the biggest loss on the week on building stocks while the U.S. dollar maintained an upside push, trading at a 96.49 5-1/2 week high Friday.

Oil futures came under pressure Thursday into overnight trade on concern over demand as economic growth in the European Union is slowing more quickly than expected in February, with the primary catalyst for the slowdown the U.S.-China trade dispute.

Optimism for a U.S.-China trade deal in February was also quashed after U.S. President Donald Trump said he would need meet with China's President Xi Jinping before the end of a truce to their trade dispute on March 1, a condition he said was needed before a final agreement would be reached.

Completing a trade deal in February was already seen as a longshot by some analysts, although the reason the two leaders won't meet by March 1 is a busy calendar for Trump, who will meet North Korea's leader, Kim Jong Un, on Feb. 27-28 in Vietnam to discuss denuclearization. The important summit might provide an acceptable reason for Trump to delay a 15% increase in U.S. tariffs on $200 billion in Chinese imports to 25% on March 2. Cabinet-level officials from the United States will meet with their Chinese counterpart in Beijing next week to continue negotiations.

U.S. supply data and declining production by the Organization of the Petroleum Exporting Countries also directed trading, with climbing commercial crude supply in the United States pressuring WTI futures while OPEC cuts in January boosted Brent.

The Energy Information Administration on Wednesday reported a 0.5 day increase in days of forward commercial crude supply to 26.6 days as of Feb. 1, a 10-week high while matching the five-year average. The building inventory comes as refiners begin idling units for seasonal turnarounds, lending upside support for oil products.

NYMEX March WTI futures eked out a $0.08 gain to $52.72 bbl, while down $2.54 from prior Friday. ICE April Brent crude gained $0.47 to a $62.10 bbl settlement while down $0.65 on the week. Brent's premium to WTI widened $1.89 or 25.2% to a 7-1/2 week high at $9.38 bbl this week. The contango at the front end of the Brent curve was also erased late this week, implying a tightening global oil market.

NYMEX March RBOB futures led Friday's gains, and edged higher since prior Friday, settling up 2.06cts at $1.4464 gallon while 0.95cts higher on the week.

Gasoline stocks, while still a sizable 12.426 million bbl above year ago stocks at 257.9 million bbl, has seen the inventory overhang narrow over the past two weeks while implied demand so far in 2019 has outpaced the comparable year-ago period by 118,000 bpd or 1.3% at 8.99 million bpd though Feb. 1.

NYMEX March ULSD futures settled up 0.8cts at $1.9085 gallon while slipping 0.42cts in value against prior Friday. Days of forward distillate supply tumbled by 3.9 days to 31.0 days during the week ended Feb. 1 -- 2.7 days less than a year ago.

U.S. sanctions on Venezuela's PDVSA seen limiting heavy crude imports to U.S. Gulf Coast refineries that need the heavy grade could cut run rates and diminish output of the middle of the barrel oil product in the short term.

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