Futures Movers: Oil edges higher as U.S. crude supplies jump, but gasoline stocks drop

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Markets/commodities reporter

Oil prices notched a modest gain on Wednesday, as gasoline futures climbed on the back of a hefty decline in U.S. supplies of the motor fuel, offsetting earlier pressure from a bigger-than-expected rise in crude supplies.

April West Texas Intermediate crude CLJ8, +0.33%  rose 25 cents, or 0.4%, to settle at $60.96 a barrel on the New York Mercantile Exchange. The contract tried for gains in the previous session, pushing briefly above $62, but gave up that run in the wake of perceived risks to the Iran nuclear deal after U.S. President Donald Trump’s ouster of Secretary of State Rex Tillerson.

May Brent crude LCOK8, +0.31% the global oil benchmark, also climbed 25 cents, or 0.4%, to $64.89 a barrel on the ICE Futures Europe exchange.

The U.S. Energy Information Administration said Wednesday that crude supplies rose by 5 million barrels for the week ended March 9. That was double the rise expected by analysts surveyed by S&P Global Platts. The American Petroleum Institute on Tuesday reported a rise of nearly 1.2 million barrels.

Gasoline stockpiles, however, dropped 6.3 million barrels for the week, while distillate stockpiles lost 4.4 million barrels, according to the EIA. The S&P Global Platts survey forecast supply declines of 500,000 barrels for gasoline and 1.6 million barrels for distillates.

“The drop in product stocks is significant with refinery utilization up 2% to 90%,” said James Williams, energy economist at WTRG Economics, who also hinted shortly after the supply report that the “upward pressure on gasoline and diesel could outweigh the bearish crude numbers.”

On Nymex, oil product prices settled higher, with April gasoline RBJ8, +1.91%  up 2% to $1.924 a gallon and April heating oil HOJ8, +0.59%  adding 0.7% to $1.887 a gallon.

Meanwhile, a monthly report from the Organization of the Petroleum Exporting Countries released Wednesday showed that the cartel’s crude production fell by 77,000 barrels a day in February to average 32.19 million barrels a day.

U.S. crude-oil production this year is expected to grow by 520,000 barrels a day from December 2017 to December 2018, while the average year-over-year growth is expected to reach 1.04 million barrels a day, mostly coming from shale, the report said.

The EIA’s report Wednesday said total U.S. crude output edged up by 12,000 barrels to 10.381 million barrels a day last week.

“With the tug of war between the U.S. and OPEC the soap opera continues,” said Scott Gecas, senior strategic account executive at Long Leaf Trading Group. “Unless the U.S. lowers production, we could see oil [in the] mid-$50s.”

The International Energy Agency and the EIA have both recently revised their U.S. oil production forecasts higher. The IEA will release its monthly oil report Thursday. Output has been helped by the 25% rise in oil prices over the past year, along with improvements in efficiency and technology.

“This U.S. shale engine is not expected to run out of steam soon,” said Stephen Brennock, analyst at brokerage PVM.

Elsewhere in the energy sector, April natural gas NGJ18, -1.65%  pulled back by 5.5 cents. or 2% at $2.731 per million British thermal units. Analysts polled by S&P Global Platts expect the EIA on Thursday to report a weekly fall of 100 billion cubic feet in domestic natural-gas supplies. That would generally match up with the five-year average decline.

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