Oil Futures Rise Despite Demand Concern

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange posted gains in afternoon trade Wednesday. The advance was underpinned by a weaker U.S. dollar and recent gains in equity markets even as traders remain fixated on flagging fuel demand domestically stoked by a larger-than-expected build in U.S. gasoline supplies last week and lower traffic activity heading into the Thanksgiving holiday.

On the session, NYMEX December West Texas Intermediate futures climbed 39 cents to settle just below $42 per barrel (bbl) at $41.82 per bbl, with next-month delivery WTI contract at a 19-cent premium to the expiring contract. ICE January Brent futures advanced 59 cents to $44.34 per bbl after trading near $45 per bbl earlier in the session. December ULSD futures gained 2.49 cents or 2.6% to finish at $1.2640 gallon. NYMEX December RBOB contract added 0.97 cent to $1.1629 gallon.

U.S. dollar declined 0.09% against a basket of foreign currencies to 92.311, lending support to WTI futures, with domestic crude having an inverse relationship with the U.S. currency.

Traffic volume in the United States showed little improvement over the past four weeks as colder weather and surging coronavirus infections in parts of the country keep drivers off the road. A lapse in coronavirus aid over the summer for millions of Americans who lost their job due to the pandemic could be another factor behind lower than usual traffic volume heading into the holiday season as they cut back spending. AAA projects Thanksgiving travel will be at least 10% lower this year compared to last year, marking the largest one-year decrease since the Great Financial Crisis in 2008.

In another blow to fuel demand, New York City Mayor Bill de Blasio announced Wednesday all public schools in the city will now be moved to remote learning only.

Coronavirus cases continue to trend higher this week, surpassing the previous records at 160,000 new infections on Tuesday.

Underscoring the data, gasoline supplied to the U.S. market, a measure for demand, fell 504,000 barrels per day (bpd) in the most recent week to 8.258 million bbl, which is more than 10% lower than a year ago. Gasoline inventories jumped 2.6 million bbl from the previous week to 228 million bbl, while remaining 4% above the five-year average.

Wednesday's government data also showed a 766,024 million-bbl increase in U.S. commercial crude oil supplies and 1.2 million-bbl build in Cushing stocks, the delivery point for the WTI contract.

Distillate fuel supplies, however, declined for the ninth consecutive week through Nov. 13, down 5.2 million bbl to 144.1 million bbl, while remaining about 11% above the five-year average. The drawdown was far larger than a 1.7 million-bbl decline expected by the market, lending support for ULSD futures.

Demand for distillates also improved from the previous week to above 4.2 million bbl, which is still down 2.5% against last year's levels.

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

Liubov Georges