Oil Continues Higher Thursday

WASHINGTON, D.C. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange moved mixed Thursday morning, pressured by an unexpected build in U.S. crude oil inventories while lent upside support ahead of a key meeting in U.S.-China trade talks.

Nymex May West Texas Intermediate futures moved $0.13 lower at $62.33, while ICE June Brent edged $0.23 higher to $69.54 barrels (bbl). May ULSD futures gained 0.57cts to trade $2.0125 gallon on continued stocks drawdown, which left distillate inventories at a 14-week low. May RBOB futures moved 0.69 cents lower to $1.9443 a gallon in midmorning trading Thursday, reversing off a $1.9558 one-week high.

An unexpected build in U.S. crude inventories held oil futures in check Wednesday afternoon, with both the WTI and Brent contracts stalling just below five-month highs at $62.99 and $69.96 bbl, respectively.

Energy Information Administration reported U.S. commercial crude oil inventories rose 7.2 million bbl in the final week of the first quarter, driven by a large 386,000 bpd weekly increase in the net import rate to 4.04 million bpd. U.S. crude production also rose 100,000 bpd to a record 12.2 million bpd after holding between 12 million and 12.1 million bpd since February. The 7.2 million bbl supply build was the second largest of the year.

EIA data did show tightening supply of refined products, as distillate stocks fell by more-than-expected 2 million bbl to 128.2 million bbl and gasoline supplies declined 1.8 million bbl to 236.8 million bbl, drawn down for an eighth straight week.

Globally, tensions in Libya escalated sharply as the Libyan National Army on Thursday recaptured most of the oil-rich southern provinces, while closing in on the capital Tripoli. According to several wire services, Libya's largest oil field, Al-Sharara and nearby El Feel with combined capacity of 395,000 barrels per day (bpd) are now in the hands of opposition forces just weeks after oilfields' operations restarted. The United Nation backed government in Tripoli now controls only the Bouri and al-Jurf offshore oil fields, producing just above 100,000 bpd.

Libya has been divided between the internationally recognized government in Tripoli and a parallel administration allied to Libyan National Army since Gaddafi's downfall.

An advance in oil futures paused Thursday morning ahead of a highly anticipated meeting between U.S. President Donald Trump and China's Premier Liu He scheduled for this afternoon.

Some analysts suggest the expected meeting indicates talks are in the final stages, and that a potential announcement would be made on a meeting between Trump and China's President Xi Jinping. Trump previously said he would need to meet with Xi before the United States would agree to a bilateral trade agreement.

Positive outcome of this meeting could provide a catalyst for WTI and Brent futures to break through key technical resistance just above Wednesday's highs.

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