Oil Futures Gain Wednesday

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled higher Wednesday, though off earlier highs, after federal data reported a third straight weekly rise in nationwide crude oil inventories, while underlining optimism over slowing coronavirus epidemic in China capped declines.

In market-on-close trade, NYMEX March West Texas Intermediate futures advanced $1.23 for a $51.17 barrel (bbl) settlement after hitting an intra-session high of $51.73 bbl. ICE April Brent contract rose $1.78 to $55.79 bbl, after gaining as much as 3.5% higher earlier in a session. The advances came despite a larger-than-expected 7.5 million bbl build reported by the Energy Information Administration in U.S. commercial crude supplies during the week ended Feb. 7, well ahead of calls for a 2.8 million bbl increase.

NYMEX March RBOB futures rallied 6.68 cents to a four-week spot high $1.5810 settlement, finding support from EIA's reported 95,008 bbl decline in domestic gasoline stocks in the reviewed week. Front-month ULSD futures surged 4.90 cents to $1.6757 a gallon -- the highest settlement since Jan. 29 after EIA reported nationwide distillate supplies eroded for a fourth straight week, down 2.0 million bbl and bringing inventories to about 5% below the five-year average. Implied demand for both refined fuels reversed lower during the first week of February.

Crude futures extended their rally into a second straight day on Wednesday after China reported another drop in the number of new coronavirus cases.

Chinese National Health Commission said the new confirmed infections totaled 2,015 as of Wednesday afternoon -- the second daily decline this week.

The country largely remains closed to the world as it tries to prevent the spread of the deadly disease, even as most of the large factories and businesses across its industrial heartland have reopened.

Beijing has also pledged to take measures to soften the blow to China's industrial sectors, spurring hopes of a speedy recovery in demand in the coming weeks.

In their Monthly Oil Market Report released Wednesday morning, the Organization of the Petroleum Exporting Countries estimated a decline of only 100,000 barrels per day (bpd) in Chinese demand during the current quarter.

Although, the cartel acknowledged the coronavirus outbreak has dented consumption of light distillates, gasoline and middle distillate, as it disproportionally affects transportation and industrial sectors. OPEC revised lower their estimates for global oil demand in 2020 by 230,000 bpd for an annual growth of 990,000 bpd.

On the supply side, the cartel reported a steep 344,000 bpd decline in crude production from Libya, pressing the group's collective output to 28.859 million bpd last month. Citing secondary sources, Iraq's crude production declined 68,000 bpd to 4.501 million bpd, with output in Kuwait down 44,000 bpd to 2.665 million bpd. Production declines were also realized in Congo, down 35,000 bpd, Angola, down 34,000 bpd and United Arab Emirates, down 29,000 bpd at 3.034 million bpd.

Crude production in Iran eased 9,000 bpd to 2.086 million bpd, and by 5,000 bpd in Algeria to 1.012 million bpd. Crude production in Venezuela was flat in January, up 1,000 bpd at 733,000 bpd.

Crude production in Saudi Arabia increased 57,000 bpd in January to 9.733 million bpd.

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


Liubov Georges