WTI Futures Advance on Large Crude Draw

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- West Texas Intermediate and ULSD futures on the New York Mercantile Exchange traded modestly higher early Wednesday, while the prompt-month RBOB contract posted marginal losses after inventory data from the American Petroleum Institute showed gasoline stockpiles increased above expectations during the week ended Feb. 5, while commercial crude oil inventories declined more than forecasted and distillate supplies fell below consensus.

U.S. Dollar Index dropped to a fresh two-week low 90.235 against a basket of foreign currencies, extending losses for the fourth straight session Wednesday as traders await the release of U.S. Consumer Price Index for January and a speech on the labor market by Federal Reserve Chairman Jerome Powell. The continuation of the downtrend appears to be the most likely scenario amidst Democrats' push for a massive $1.9 trillion stimulus bill and Fed's "lower-for-longer" stance on interest rates. The potential upside for the greenback once again comes from an improved posture against the pandemic and prospects of economy's comeback in the second half of the year. This week's inoculation rate jumped above 1.5 million doses a day, with the United States currently on track to vaccinate 75% of its population in the next ten months.

Early Wednesday, traders also positioned ahead of the weekly inventory report from the U.S. Energy Information Administration set for a 10:30 a.m. ET release.

American Petroleum Institute reported late Tuesday domestic crude oil supplies tumbled 3.5 million barrels (bbl) in the week ended Feb. 5, while stocks at the Cushing, Oklahoma hub also continued lower, down 1.378 million bbl. Gasoline stockpiles increased 4.810 million bbl, more than three times calls for a 1.4 million bbl gain and distillate inventories declined 487,000 bbl, below estimates for a drop of 1.1 million bbl.

Traders are likely to pay close attention to U.S. crude production following the latest price rally that lifted WTI to a better-than-one high. EIA doesn't expect, however, domestic production to recover until the second half of the year, as output from newly drilled wells will be more than offset by declining production rates at existing wells. In June, domestic production is expected to fall below 11 million barrels per day (bpd) at 10.9 million bpd. In its Short-term Energy Outlook, the agency increased its forecast for U.S. crude output next year to 11.53 million bpd, up from previous month's estimate of 11.49 million bpd. Currently, domestic crude production is hovering below 11 million bpd, down from a peak of 13 million bpd in 2020.

Near 7:30 a.m. ET, March WTI futures added 36 cents to trade at $58.72 bbl and the international crude benchmark Brent contract for April delivery climbed 44 cents to $61.53 settlement. NYMEX March ULSD futures gained 0.86 cent to a one-year spot high $1.7651 gallon, and March RBOB futures slipped 0.32 cent to $1.6704 gallon.

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

Liubov Georges