WASHINGTON (DTN) -- Crude and product futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange reversed lower Wednesday amid growing concerns over building inventories in the United States after government data reported a fifth consecutive increase in domestic crude supply last week and an expected surge in gasoline stocks. Losses were limited by optimism that a U.S.-China trade deal would be reached before a Dec. 15 deadline.
The U.S. dollar surged to a seven-week high at 98.370 in midafternoon index trade, also weighing on the oil complex. The dollar strengthened after third quarter U.S. gross domestic product was reported at a higher-than-expected 2.1% expansion rate.
Following a three-session rally, NYMEX January West Texas Intermediate futures settled down $0.30 at $58.11 per barrel (bbl), and the ICE January Brent contract slipped $0.21 to $64.06 bbl ahead the contract's expiration at end of day Friday (11/29). The next month delivery Brent February futures settled the session at a $1.05 discount to the expiring contract.
Products posted steeper declines on the session, with NYMEX December ULSD futures dropping 1.41 cents to $1.9465 gallon at settlement and NYMEX December RBOB futures sank 2.55 cents to $1.6792 gallon. Both contracts will expire at the week's end.
Energy Information Administration's midweek inventory report largely disappointed the market, sending crude contracts into Thanksgiving holiday break with modest losses. The data detailed a counter-seasonal decline in refinery run rates, down 0.2% to 89.3%, with crude throughputs averaging 16.3 million barrels per day (bpd) during the reviewed week, nearly 1.419 bpd lower than a year ago. Adding to the bearishness, domestic crude production increased 100,000 bpd to a new record high 12.9 million bpd.
The most puzzling part of the report was a sizable 5.1 million bbl increase in gasoline supply, while markets expected a more modest build of 1.6 million bbl. After building for three straight weeks, domestic gasoline supply is now about 4% above the five year average at 226 million bbl.
In distillate fuels, stocks posted their first build in nearly two months, up 725,000 bbl to 116.4 million bbl on a higher demand and production rate during the week reviewed, leaving stocks still about 12% below the five-year average.
Midmorning losses were limited by another decline in U.S. oil rigs during the holiday-shortened week, down three to a fresh 32-month low at 668; this is 219 below the year-ago count. Year-to-date, 217 rigs have been laid down with 45 rigs removed from service in the fourth quarter.
U.S.-China trade talks continue to exert an outsized impact on markets, with the latest chatter indicating both sides are inching closer to a resolution to end a punitive 16-month long tariff war. U.S. stocks continued higher for a fourth day in a row, with all major indexes hitting fresh record highs.
"We are in the final throes of a very important deal," said U.S. President Donald Trump on Tuesday when asked about the progress of a phase 1 trade agreement with China.
The situation remains fluid.
Liubov Georges can be reached at firstname.lastname@example.org
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