WTI Erases Gains as Crude Build Eyed

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON(DTN) -- Retreating from a three-month high, West Texas Intermediate futures on New York Mercantile Exchange dropped 1.5% in pre-inventory trade Wednesday after industry data showed a larger-than-expected build occurred in U.S. commercial crude oil inventories during the week ended June 19, while surging coronavirus cases in the United States and globally further weakened sentiment for product demand, pressuring front-month RBOB and ULSD futures.

American Petroleum Institute on Tuesday reported domestic crude stocks increased by 1.749 million barrels (bbl) during the week-ended June 19, with most analysts expecting a more modest build after inventories hit a record high for the third week in row. If realized, the crude build would signal an oversupplied market suffering from depressed demand weeks after most parts of the country eased quarantine restrictions.

Data also reported gasoline supply declined by a less-than-expected 325,000 bbl despite mobility data showing traffic activity in the United States hit a 2020 high, up 46%, in the most recent week.

The green shoot in the data were distillate stocks that decreased well above estimates at 3.856 million bbl. If realized, the drawdown would be the second consecutive decrease in nationwide distillate stockpiles since early March, underlining the recent rebound in U.S. manufacturing activity. U.S. Purchasing Manufacturing Index for June released Tuesday showed continued improvement in manufacturing activity to 46.7%, up 10.4% from April's deep contraction.

Traders now await official supply data from U.S. Energy Information Administration due out 10:30 a.m. ET.

Near 7:15 a.m. ET, U.S. crude benchmark dropped $0.70 to $39.63 bbl and international benchmark Brent crude traded near $42 bbl. NYMEX RBOB July futures pullback 2.12 cents to near $1.2782 gallon and front-month ULSD futures declined marginally to near $1.1974 gallon, hovering near a 15-week high $1.2030 gallon.

Separately, John Hopkins University on Tuesday reported 2.347 million cases of coronavirus in the United States, a 1.6% daily increase from an average 1.3% over the past seven days. Arizona, Texas, Florida and California continue to report a record rate of new daily infections. National Institute of Allergy and Infectious Diseases Director, Dr. Anthony Fauci said during his testimony to Congress the recent spike in coronavirus cases was "alarming," rekindling concerns that local and regional governments could force partial shutdown of the economy once again.

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

Liubov Georges