Oil Rallies in Midday Trade

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange rallied late Wednesday morning, adding to early session gains following the release of weekly supply data from the Energy Information Administration that showed across the board inventory draws and that the United States was a net exporter of oil for the second time on record last week.

A 1.605 million barrels per day (bpd) plunge in U.S. crude imports lowered the amount of foreign crude barrels received at U.S. ports to a 5.917 million bpd 23-year low during the week ended Feb. 25, according to EIA. U.S. crude exports at 3.359 million bpd, easing from a record high 3.607 million bpd export rate week prior, brought the net import figure to 2.558 million bpd.

U.S. net product imports were a negative 2.72 million bpd, meaning the United States exported 2.72 million bpd more oil product than was imported, leading the United States to become a net crude and products exporter of 162,000 bpd last week. The previous week when the United States was a net exporter was the week-ended Nov. 30, 2018, with a net export rate of 211,000 bpd.

An 842,000 bpd drop in U.S. crude imports into the PADD 3 Gulf Coast to 1.677 million bpd during the week profiled was the tipping point, and aligns with Saudi Arabia's decision to dramatically cut exports to the United States to bolster oil prices joined by lower Venezuelan crude exports amid U.S. sanctions. During the four weeks ended Feb. 25, PADD 3 crude imports averaged 1.81 million bpd, down 681,000 bpd against the comparable year-ago period.

Saudi Arabia said crude production from the kingdom would average 9.8 million bpd in March, down from a record high 11.016 million bpd in November. Goldman Sachs on Monday estimated a loss of at least 100,000 bpd in Venezuelan crude exports since late January when the United States sanctioned Venezuela's state-owned oil company PDVSA, and sees the prospect for another 200,000 to 300,000 bpd loss in Venezuelan crude exports in the coming months.

The drop in U.S. crude imports led to an 8.6 million barrel (bbl) draw in domestic commercial crude stockpiles to a 445.9 million bbl four-week low for the week reviewed, while narrowing a year-on-year surplus 11.6 million bbl to 22.4 million bbl or 5.3%.

A 100,000 bpd boost in U.S. crude production to a fresh record high of 12.1 million bpd was more than offset by a 179,000 bpd increase in U.S. crude inputs to 15.89 million bpd.

A larger-than-expected 1.9 million bbl draw in gasoline stocks to a 254.9 million bbl seven-week low was another bullish data point, shrinking a year-on-year supply surplus 4.4 million bbl during the week. It was the sixth consecutive week in which the surplus shrunk, narrowed by 12.5 million bbl since mid-January to 3.1 million bbl.

Total oil product supplied to market is running 269,000 bpd or 1.3% above year-ago through Feb. 25 at 20.832 million bpd, with implied distillate demand averaging 4.205 million bpd cumulatively through Feb. 25, 91,000 bpd or 2.2% above year-ago levels.

The climbing demand rate for distillate fuel implies a strong U.S. economy.

At last look, Nymex WTI April futures were up $1.66 at $57.16 bbl, with the ICE Brent April contract up $1.26 at $66.47. Nymex RBOB March futures were up $0.0369 at $1.6232 gallon and ULSD March futures were up $0.0288 at $2.0273 gallon.

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

(BAS)

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