Oil Futures Sink on Bearish EIA Supply

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange tumbled on Thursday, with West Texas Intermediate settling at a 2-1/2 month low in response to bearish government supply data, detailing a smaller-than-expected drawdown in U.S. inventories, while China moves to restrict access of U.S. agriculture to its' market.

NYMEX July WTI futures were down $2.22 to settle at $56.59 per barrel (bbl), the lowest settlement on the spot continuous chart since March 8. ICE July Brent crude responded more bearishly to the U.S. stock changes, down $2.58 to settle at $66.87. NYMEX June RBOB futures plunged to a 2-1/2 month spot low at $1.8786 gallon, down 6.66 cents or 3.59%. NYMEX June ULSD futures were 5.25 cents or 2.78% lower with a $1.9150 gallon settlement, with July ULSD at $1.9183 gallon.

Energy Information Administration said U.S. crude inventories fell by 300,000 bbl in the week ended May 24, well below a drawdown of 5.265 million bbl reported on Wednesday by American Petroleum Institute. U.S. crude stockpiles remained last week at a nearly 20-month high, while still 5% above the five-year average for this time of the year. 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.

In refined products, gasoline stocks increased 2.2 million bbl during the week profiled, less than a 2.711 million bbl API reported build, while gasoline demand slipped 36,000 bpd, despite the typical forward supply staging in front of the busy travel Memorial Day weekend. Distillate stocks were drawdown by 1.6 million bbl compared with an API reported 2.144 million bbl decline. 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.

Meanwhile, China accused the Trump Administration of committing "economic terrorism" on Thursday, further raising the stakes in trade tensions between the two countries. The comments from China's officials came after Beijing announced it would stop purchases of U.S. soybeans, which have long been China's key trade card in ongoing tariff dispute. Earlier this week, China suggested it would cut off exports of rare-earth materials to the United States, which are widely used for production of smartphones and electronics.

Trade tensions between Washington and Beijing escalated sharply earlier this month after nearly yearlong talks between the two economic superpowers broke off with no scheduled plans for further meetings.

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