WTI Futures Add to Gains After EIA Showed Large Crude Draw

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- While the prompt-month RBOB contract declined, crude and ULSD futures on the New York Mercantile Exchange extended higher in late-morning trade Wednesday after weekly inventory data reported U.S. commercial crude and distillate stocks fell sharply during the week ended Feb. 5, while gasoline supplies increased above expectations amid lingering weakness in fuel demand and blizzard weather conditions across Northeastern states.

Near midday in New York, West Texas Intermediate futures for March delivery climbed 34 cents to trade near $58.69 barrel (bbl), with the Brent April contract on the Intercontinental Exchange advancing 46 cents to $61.55 bbl. NYMEX March ULSD futures traded at better than one-year spot high $1.7628 gallon and front-month RBOB futures fell 1.5 cents to $1.6587 gallon.

The Energy Information Administration said Wednesday morning domestic gasoline supplies increased 4.3 million bbl from the previous week to 256.4 million bbl, nearly four times above market expectations for a 1.4 million bbl build. Over the past week, gasoline supplied to the U.S. market, a measure for demand, averaged just below 7.9 million barrels per day (bpd) -- down 10% from the same period a year ago. Further weighing on demand, blizzard conditions across Northeastern states last week likely kept drivers off the roads. Apple mobility data showed traffic activity in the United States held below the Jan. 13 baseline for most of the month.

Further details of the report showed distillate stocks fell 1.7 million bbl in the reviewed week to 161.1 million bbl and are now 7% above the five-year average. Earlier in the week, analysts had forecast distillate supplies would fall by 1.1 million bbl from the previous week. Distillate supplied to the U.S. market gained 110,000 bpd from the previous week to 4.308 million bpd.

U.S. commercial crude oil stocks fell sharply in the reviewed week even as crude exports declined and refiners unexpectedly increased utilization rates. Data showed a 6.6 million bbl crude drawdown compared with analysts' median expectations for a 100,000 bbl increase from the previous week. The actual decline also exceeded earlier estimates from the American Petroleum Institute for a 3.5 million bbl draw, delivering a bullish surprise to the market. Domestic crude oil inventories narrowed a surplus against the five-year average to 2%, and still stand about 5% above year ago.

The draw was realized even as crude oil exports decline 870,000 bpd from the previous week to 2.617 million bpd and refiners increased run rates to 83%, up 0.7% from the previous week. The median forecast called for refinery utilization rates was for a 0.3% decline from the previous week.

Oil stored at Cushing, Oklahoma, the delivery point for the WTI futures contract, fell by 658,000 bbl from the previous week to 48 million bbl, said EIA.

U.S. crude oil production rose by 100,000 bpd on the week to 11 million bpd. In its latest Short-Term Energy Outlook, the agency lowered its projection for U.S. crude output by 100,000 bpd this year to 11.2 million bpd. EIA sees production to decline further in coming months, reaching 10.9 million bpd midsummer before starting to slowly recover in the second half of the year.

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

Liubov Georges