DTN Oil

WASHINGTON (DTN) -- Nearby delivery oil futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange retreated from February highs on Thursday. Traders took profits after this month's sharp runup following a steep drawdown in U.S. inventories and lower crude production. The move lower was realized even as traders anticipate the pace of stock decline to accelerate in coming weeks on lower crude output from Texas oilfields amid power outages and freezing temperatures, which also curtailed Gulf Coast refining yields.

On the session, West Texas Intermediate futures for March delivery dropped 62 cents to settle at $60.52 barrel (bbl) and the Brent April contract declined 41 cents to finish just below $64 bbl, with losses accelerating post settlement. WTI and Brent fell the most in two weeks on Thursday as investors booked profits following a five-day rally that propelled both contracts to their highest trades in over a year.

NYMEX March ULSD futures settled slightly lower at $1.8364 gallon and March RBOB futures declined 1.62 cents for a $1.7943 gallon settlement. Both product futures fell nearly 2% since settlement.

In outside markets, stocks on Wall Street pulled back and the U.S. Dollar Index dropped back to 90.60 after this week's unemployment report turned out to be a big disappointment, ending a streak of better-than-expected economic data and underscoring the economy's incomplete recovery. The Labor Department reported initial unemployment claims during the week ended Feb. 13 unexpectedly jumped to 861,000, with California and Illinois once again driving the increase -- with new applications by the two states combined up 54,148. Dow Jones Industrials dropped 119 points on the session, paring a deeper decline in earlier trading.

Thursday's lower settlements came despite a mostly bullish U.S. inventory report, showing commercial crude stocks fell by 7.257 million bbl during the week ended Feb. 12, while oil producers cut output by 200,000 barrels per day (bpd) to 10.8 million bpd. Refiners, meanwhile, increased run rates for each week this month, reaching a 14.819 million bpd processing rate during the week ended Feb. 12. Thursday's inventory report does not reflect this week's severe supply outages in the nation's key energy hub.

Industry analysts estimate more than 4 million bpd of refining capacity and 3.5 million bpd of crude production was taken offline due to the power outages and freezing weather that disabled equipment. The data was mostly supportive for refined products as well, showing higher implied demand for both gasoline and distillates, while a larger-than-expected draw in distillate stocks. At 157.7 million bbl, nationwide distillate supplies still stand about 6% above the five-year average level. Stockpiles fell by 3.4 million bbl in the reviewed week, nearly three times above the calls for a 1.6 million bbl decline.

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