WTI Falls to Seven-Month Lows

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Intercontinental Exchange Brent crude plummeted more than 2% Wednesday afternoon, with both benchmarks settling at the lowest level since mid-January after bearish government data triggered fresh demand concerns due to a weakening global economy.

NYMEX September West Texas Intermediate futures fell 4.7% to $51.09 per barrel (bbl), while ICE October Brent contract tumbled $2.71 to settle at $56.23 bbl, with both contracts falling deep into bear market Wednesday afternoon. NYMEX September ULSD futures settled 7.08 cents down at $1.7532 gallon seven-month low on continuous spot basis, while September RBOB contract settled 6.70 cents lower at $1.6203 gallon, shedding nearly 2.38% on a session.

Oil futures nosedived after Energy Information Administration data showed across-the-board builds in U.S. commercial crude and petroleum inventories, while also reporting a surprising sharp drop in oil exports for the week ended Aug. 2. EIA reported crude stocks in the United States increased by 2.4 million bbl last week to 438.9 million barrels, about 2% above the five-year average for this time of the year.

The bearish data largely disappointed the markets that expected another sizable drop in domestic supplies following seven consecutive weeks of draws. Adding to the bearishness of report, domestic crude production continued higher for the second consecutive week, up 100,000 barrels per day (bpd) to 12.3 million bpd and about 14% more than the same time in 2018.

Meanwhile, oil refinery inputs rose 786,000 bpd versus the previous week and nearly 1% from the year prior. Market analysts also highlight an unusual reversal in US crude oil imports and exports statistics in the profiled week. EIA figures showed U.S. crude oil imports gained 485,000 bpd to 7.1 million bpd during the week-ended Aug. 2, while exports unexpectedly declined by a sizable 709,000 bpd to 1.865 million bpd. Though lower on the week, four-week average crude oil exports at 2.566 million bpd were more than 40% higher than the same four weeks in 2018. In refined products, EIA reported gasoline inventories rose for the first time in three weeks to about 4% above the five-year average for this time of year, while four-week average demand was 1.8% lower compared to the corresponding four-week period last year. Distillate fuel inventories gained 1.2% on the week, leaving stocks at a 9.6% year-over-year supply surplus.

Oil prices tumbled nearly 13% in the first week of August, highlighting investors' concerns over the state of the global economy and oil demand. Market participants now await a monthly supply report from the International Energy Agency on Friday, which is widely expected to detail lower demand estimates. IEA Executive Director Fatih Birol signaled last month that the agency would revised lower global oil consumption by 100,000 barrels in 2019. Analysts warn that there could be further drop in oil prices, if the United States and China don't cool down the trade tensions in the coming months. Analysts from Merrill Lynch warned this week that they expect a global recession within the next three quarters, if the U.S. hikes tariffs on the remaining imports from China to 25% for four to six months.

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

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