Oil Futures Rally at the Close

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Intercontinental Exchange Brent futures registered sharp gains during the midweek session on bullish weekly supply data, with the April West Texas Intermediate contract expiring at a four-month high on the spot continuation chart after topping $60 barrel (bbl) for the first time since mid-November.

Nymex April WTI expired up $0.80 at $59.83 bbl after trading at a $60.12 bbl four-month spot high, with the May contract settling at a $0.40 premium to the April contract at $60.23 bbl.

ICE May Brent futures rallied $0.89 to a $68.50 bbl four-month high settlement on the spot continuation chart, ending near a $68.57 intraday high.

Nymex April RBOB futures rallied to a $1.9190 fresh five-month high on the spot continuous chart, settling near the high water mark at $1.9166 gallon for a 2.35 cents gain. April ULSD futures settled up 1.77 cents at $2.0081 gallon, easing 0.060 cent from a $2.0141 two-week high.

Oil futures rallied as the Energy Information Administration reported a 9.6 million bbl drawdown from U.S. commercial crude inventory during the week-ended March 15 that pressed stocks to a nine-week low at 439.5 million bbl. The steep drawdown during the refinery maintenance season was driven by a sharp increase in U.S. crude exports, up 846,000 barrels per day (bpd) to 3.392 million bpd, as the global oil market tightens.

Data released Wednesday illustrates production cuts by the Organization of the Petroleum Exporting Countries and non-OPEC oil producers and U.S. sanctions on Iran and Venezuela are having an effect on U.S. oil inventory, with a year-on-year surplus in commercial crude stocks narrowing a sharp 22.827 million bbl or 67% during the four weeks ended March 15 to 11.2 million bbl or 2.6%. A year-on-year surplus in total U.S. commercial crude and products stocks have dropped 45.21 million bbl or 3.6% since mid-January when they reached a 15-month high to a 1.2219 billion bbl 6-1/2 month low last week.

Both gasoline and distillate stock levels declined more than expected last week to 11-week lows at 241.5 million and 132.2 million bbl, respectively, with total products implied demand gaining against year ago. EIA reported total product supplied to market is running 260,000 bpd or 1.3% higher against year ago at 20.860 million bpd, with the pace accelerating in March. Through the four weeks ended March 15, total oil product implied demand was 21.065 million bpd, up 578,000 bpd or 2.8% against the comparable year-ago period.

The conclusion of the two-day Federal Open Market Committee meeting this afternoon offered mixed support for oil futures, with the Fed not planning an increase in the federal funds rate in 2019, indicating "the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate."

The last increase was a 25 basis point boost to 2.5% in December that sparked a widespread sell-off in equities and commodities.

The U.S. dollar plunged to a seven-week low following the 2 p.m. ET announcement, with a majority consensus having indicated their expectations for one 25 basis hike in the federal funds rate later this year.

Central bank officials did downgrade expectations for U.S. economic expansion this year and next, shaving 0.2% off its projection for U.S. gross domestic product in 2019 from its outlook in December, now expecting an annualized growth rate of 2.1%. The Fed trimmed expectations for 2020 from a 2.0% annual expansion to 1.9%.

"Information received since the Federal Open Market Committee met in January indicates that the labor market remains strong but that growth of economic activity has slowed from its solid rate in the fourth quarter," according to the Fed's announcement Wednesday afternoon.

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