Oil Futures Move Lower on Bearish US Inventory Data

VIENNA (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange moved lower in early trade Thursday following Wednesday's Energy Information Administration report which showed U.S. crude oil and product inventories swelled last week, taking the wind out of the sails of this week's rally.

According to the EIA, domestic commercial crude oil stocks reached a 20-month high of 455.1 million barrels (bbl) during the week ended Feb. 3, while gasoline and middle distillate inventories recorded a 5 million bbl and 2.9 million bbl increase, respectively.

While refinery runs did pick up slightly from a week earlier, this also came on the back of lackluster domestic fuel demand. Finished gasoline supplied to the U.S. market, a proxy for demand, is trailing year-ago levels by 3% over the four weeks through Feb. 3, while the four-week average for distillate fuel oil supplied is down a whopping 16% year-on-year.

The Department of Labor Thursday morning reported a 13,000 increase in U.S. jobless claims to 196,000 for the week ended Feb. 4, slightly more than expected, as the market looks for any signs of slowdown in the labor market. In January, U.S. job growth surged by 513,000.

Chinese CPI and PPI data are scheduled for release overnight that will help firm up expectations surrounding Chinese demand. The University of Michigan's Consumer Sentiment Index scheduled for Friday is expected to remain unchanged from January.

The U.S. Dollar Index shed 0.6% against a basket of foreign currencies to trade near 102.655 following the weekly claims report, while front-month West Texas Intermediate futures fell below $78 bbl. The international crude benchmark Brent traded on ICE softened to $84.60 bbl, holding on to most of this week's gains.

Karim Bastati can be reached at Karim.Bastati@dtn.com