CRANBURY, N.J. (DTN) -- Oil futures on the New York Mercantile Exchange nearest to delivery and the International Exchange Brent contract advanced to two-week high settlements Thursday afternoon, with the exception of the gasoline contract which ended at a one-week high following a back-and-forth session. Thursday's gains again were driven by weekly government supply data released Wednesday, and concern an intensifying Hurricane Dorian could veer into the Gulf of Mexico next week.
DTN forecasts Hurricane Dorian to lash the Bahamas as a major hurricane late Saturday through Monday before reaching the southern Florida coastline Tuesday morning. Warm water conditions will allow the storm to intensify to a category four hurricane with 130 miles per hour wind speed east of the Florida coast.
Traders went long or covered short positions during market-on-close trade, with concern a more southerly track would put Hurricane Dorian into the Gulf of Mexico's oil and gas production region. Maritime oil transit through the region will also be disrupted by the powerful hurricane. DTN forecasts hurricane strength winds to extend out 30 to 40 nautical miles this weekend, with rough seas extending out 100 to 120 nautical miles.
Buying spurred by concern over supply and transit disruptions joined ongoing support from bullish inventory statistics released Wednesday by the Energy Information Administration, which showed across the board U.S. supply drawdowns, including a 10 million barrel (bbl) drop in commercial crude inventory.
EIA data shows days of forward crude supply fell from a 28.9 high on May 31 to 24.4 days as of Aug. 23, slipping below the five-year average for the first time since late March. EIA also reported weekly crude imports below 6 million barrels per day (bpd) for the second time in 2019, with the last time the import rate fell below 6 million bpd in February 1996.
Adding to the bullishness, Genscape reported Cushing crude stocks have dropped another 300,000 bbl since the EIA's most recent data set. On Wednesday, EIA reported crude supply at the Oklahoma supply hub declined for the seventh consecutive week to a 42.3 million bbl, 6-1/2 month low last week, moving below the five-year average for the first time since late May.
Cushing crude stocks are expected to continue being drawn down following the August startup of the Cactus II and EPIC pipelines, adding 1.07 million bpd of takeaway capacity from the prolific Permian Basin. Pipeline takeaway constraints had slowed supply growth from the Permian.
NYMEX October WTI futures settled up $0.93 at $56.71 bbl, ending above the 200-day moving average at $56.08 which should draw technical buying. WTI gained despite a stronger U.S. dollar, which rallied 0.335 to a 98.455 four-week high in index trading.
ICE October Brent settled $0.59 higher at $61.08 bbl ahead of expiration Friday afternoon, with the November contract settling at $60.49 bbl. NYMEX September ULSD futures gained 1.3 cents at $1.8640 gallon ahead of expiration Friday afternoon, with the October contract ending at a 60 points premium in the contango market. NYMEX September RBOB futures eked out a 0.23 cents gain at $1.6847 gallon following choppy MOC trade, with the October contract narrowing its discount to the expiring contract to 11 cents at $1.5748 gallon.
Brian L. Milne can be reached at email@example.com
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