Oil Futures Drop in Midday Trade

CRANBURY, N.J. (DTN) -- Supply data released late morning from the Energy Information Administration triggered additional selling by oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange, with futures responding swiftly to weekly EIA statistics that countered mostly supportive data released late Wednesday by the American Petroleum Institute.

A 300,000 barrels (bbl) draw in commercial crude oil inventory in the United States during the week ended May 24 was well below an API reported 5.265 million bbl decline for the week, with stocks still hovering near a 20-month high, while widening a year-on-year surplus 3.4 million bbl to 42 million bbl or 9.7%.

Commercial crude inventory has expanded by 27 million bbl in the second quarter despite efforts by the Organization of the Petroleum Exporting Countries to reduce global oil inventory amid a production cut agreement now entering its sixth month.

Building crude stocks are realized with a second weekly 100,000 barrels per day (bpd) increase in U.S. crude production, which returned to a 12.3 million bpd record high during the week ended May 24.

Refiner crude inputs are above the five-year average, although trailing the year-ago pace. During the four weeks ended May 24, U.S. refiners averaged 16.607 million bpd in crude inputs, down 119,000 bpd against the comparable year-ago period.

Gasoline stocks increased 2.2 million bbl during the week profiled, less than a 2.711 million bbl API reported build, but at 230.9 million bbl, crossed above the five-year average for the first time since the last week in the first quarter. Moreover, implied gasoline demand slipped 36,000 bpd to 9.394 million bpd despite the typical forward supply staging in front of the busy travel Memorial Day weekend.

Implied gasoline demand has held below year-ago and the five-year average for three weeks running, while at 9.46 million bpd, the four-week average is 211,000 bpd or 2.2% below the comparable period in 2018.

The net gasoline import rate dropped back from a 934,000 bpd spike in mid-May, but at 370,000 bpd, is the third highest in 2019.

A 1.6 million bbl draw in distillate stocks was modest compared with an API reported 2.144 million bbl decline, while implied demand again trailed year ago despite a 495,000 bpd jump during the week profiled to 4.282 million bpd. Distillate implied demand during the four weeks ended May 24 averaged 4.015 million bpd, 106,000 bpd or 2.6% below the same four weeks in 2018.

At the noon hour in New York, NYMEX July West Texas Intermediate futures were down $1.15 or 1.9% near $57.65 bbl, holding above Wednesday's $56.88 11-week low on the spot continuous chart.

ICE July Brent crude responded more bearishly to the U.S. stock changes, down $2.05 or 2.9% at $67.41, testing support at the $67.33 100-day moving average. July Brent narrowed its premium to the August contract to about $1.30 bbl ahead of expiration Friday afternoon.

NYMEX June RBOB futures plunged to a two-month spot low at $1.8917 gallon, down 4.75 cents or 2.5% to near $1.8975 gallon at the top of the hour. The expiring June contract narrowed its premium to July delivery to about 2 cents gallon. NYMEX June ULSD futures were 3.4 cents or 1.7% lower at $1.9335 gallon, with July ULSD at $1.9375 gallon.

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

(BAS)

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