DTN Oil

CRANBURY, N.J. (DTN) -- Nearest-delivered oil futures on the New York Mercantile Exchange and the prompt Brent contract on the Intercontinental Exchange advanced for a third session Wednesday, with West Texas Intermediate finding buying support on a weaker U.S. dollar that offset an increase in domestic crude production.

The upside price push was realized despite several bearish line items in the weekly inventory report from the Energy Information Administration released midmorning, which detailed a 4.2 million-barrel (bbl) build in total U.S. oil stocks and 385,000-barrel-per-day (bpd) falloff in total products sold in the U.S. market for last week, as traders continue to lift contract values in the oversold market following the post-Thanksgiving selloff.

Details of the EIA report did highlight some positive developments, with implied gasoline demand up 167,000 bpd to 8.963 million bpd during the week ended Dec. 3, while four-week average demand at 9.083 million bpd was 1.093 million bpd or 13.7% above the comparable four weeks a year ago. The first COVID vaccines had not yet been administered during the comparable 2020 period depressing road travel, with the first jab in the United States occurring on Dec. 15, 2020.

Gasoline stocks increased 3.882 million bbl during the week ended Dec. 3 that was in line with an American Petroleum Institute finding of a 3.705 million-bbl build, with stocks ending at a 219.304 million-bbl eight-week high. Seasonally, gasoline stocks build this time of year as refiners in Texas and Louisiana boost runs to work down crude stocks ahead of ad valorem taxes on refinery crude stocks at year's end. EIA reported a 1% increase in the refinery run rate to an 89.8% 14-week high during the reviewed period.

While the 241,024-bbl draw on commercial crude stocks was well below an API-reported 3.089 million bbl decline, there was a 1.7 million-bbl draw from the Strategic Petroleum Reserve last week, with the SPR holding 600.9 million bbl as of Dec. 3, EIA data shows.

Another 100,000-bpd increase in U.S. crude production last week, the third consecutive week with a 100,000-bpd hike in domestic output was bearish, with the 11.7 million-bpd production rate the highest since the end of April 2020. The increase in U.S. crude production was offset with a weaker U.S. dollar, with the dollar index down 0.489 to a 95.881 two-week low.

NYMEX January WTI futures settled up $0.31 at $72.36 per bbl, holding below Tuesday's $73.03 intraday high. ICE February Brent futures faded gains after reaching a $76.37 per bbl intraday high to settle up $0.38 at $75.82 per bbl.

Traders shrugged off a 2.7 million-bbl build in distillate inventory to 126.6 million bbl coerced by a 631,000-bpd plunge in distillate fuel supplied to the U.S. market, finding support in stocks that are 6.329 million bbl or 4.8% below the three-year average as of Dec. 3, while exports surged 630,000 bpd to a 1.218 million-bpd four-week high, EIA data shows. It was the eighth week in 2021 in which distillate fuel exports topped 1.2 million bpd, and only the second time since August.

NYMEX January ULSD futures settled 3.67 cents higher at $2.2613 per gallon, adding another penny in post-settlement trade. NYMEX January RBOB futures settled with a 4.85-cent gain at $2.1485 per gallon.

Brian L. Milne can be reached at brian.milne@dtn.com