DTN Oil

WASHINGTON, D.C. (DTN) -- Crude and refined products futures on the New York Mercantile Exchange rallied in late morning trade Wednesday, lifting front-month West Texas Intermediate above $70 per barrel (bbl) despite government data from the U.S. Energy Information Administration showing commercial crude oil supplies unexpectedly increased and refiners reduced run rates for the third consecutive week through July 16, pressured by lackluster demand for petroleum products.

Near 11:45 AM ET, NYMEX WTI September futures rallied $2.97 or 4.4% to $70.17 bbl, and international Brent crude benchmark for September delivery jumped above $72 bbl to $72.12 bbl. NYMEX August RBOB futures rallied 7.39cts to 2.2054 gallon, and NYMEX August ULSD futures surged 7.24cts to $2.0848 gallon.

Gasoline supplied to the U.S. market, a measure for demand, remained little changed during the week-ended July 16 at 9.295 million bpd, once again failing to meet market expectations for blowout gasoline consumption this summer amid a pickup in road travel. Domestic gasoline supplies slipped 121,000 bbl from the previous week to 236.4 million bbl, bearish against analyst expectations for inventories to have decreased by 1.1 million bbl.

Distillate stocks, however, fell unexpectedly, down 1.3 million bbl last week to 141 million bbl and remain about 4% below the five-year average, the EIA said. Earlier in the week, analysts expected distillate supplies would rise by 700,000 bbl. Distillate demand reversed higher from a seven-month low 3.164 million bpd reached during the holiday-week of July 9 to 3.925 million bpd. Distillate consumption in the United States has remained below 4 million bpd for each week except one over the past month.

Refiners processed 86,000 bpd less crude last week at a daily rate of 16.07 million bbl, reducing capacity utilization to 91.4%. Earlier in the week, analysts expected refiners to have increased run rates by 0.3%.

With refiners reducing rates and fuel demand underwhelming expectations, nationwide crude oil stocks increased for the first time in over two months, down 2.1 million bbl from the previous week compared with consensus for another weekly drawdown. At 439.7 million bbl, commercial crude oil inventories still stand about 7% below the five-year average.

Oil stored at Cushing, the delivery point for the WTI contract, fell by 1.3 million bbl from the previous week to 36.7 million bbl.

U.S. crude oil production remained flat at 11.4 million bpd last week, according to the EIA.

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