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

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Markets/commodities reporter

Oil prices extended earlier losses on Wednesday, as a weekly jump in U.S. gasoline stockpiles that was more than twice what the market expected positioned futures prices for their lowest settlement in six weeks.

January West Texas Intermediate crude CLF8, -2.45%  lost 80 cents, or 1.4%, to $56.82 a barrel on the New York Mercantile Exchange—ready for its lowest finish since in more than two weeks, according to FactSet data. Brent oil for February LCOG8, -2.18%  gave up 73 cents, or 1.2%, to $62.13 a barrel on the ICE Futures Europe exchange.

The U.S. Energy Information Administration reported Wednesday that domestic crude supplies fell 5.6 million barrels for the week ended Dec. 1. That was bigger than the forecast for a decline of 4.1 million barrels from analysts surveyed by S&P Global Platts. The American Petroleum Institute on Tuesday had reported a drop of 5.5 million barrels.

“A solid draw to crude inventories amid higher refinery runs—hark, nearly 800,000 [barrels per day] above year-ago levels—has been offset by a whopper of a build to gasoline inventories,” said Matt Smith, director of commodity research at ClipperData.

Gasoline stockpiles jumped by 6.8 million barrels for the week, while distillate stockpiles added 1.7 million barrels, according to the EIA. The S&P Global Platts survey forecast a supply rise of 2.7 million barrels for gasoline and an increase of 1.5 million barrels for distillates.

Gasoline for January RBF8, -3.14%  fell 2.1% at $1.682 a gallon. A settlement around this level would be the lowest since Oct. 24, FactSet data show.

Among the heating fuels, January heating oil HOF8, -2.53%  traded at $1.878 a gallon, down 1.9%. January natural gas NGF18, -0.17%  rose less than 0.1% to $2.916 per million British thermal units.

Refiners “actually beat demand with [gasoline] production at a near record 9.758 million barrels a day, compared to daily demand of 8.895 million barrels a day last week,” said Phil Flynn, senior market analyst at Price Futures Group.

Domestic refineries operated at 93.8% of operable capacity last week, up from 92.6% a week earlier, the EIA data showed.

“As refiners are encouraged to keep running full tilt, and as oil imports remain depressed, crude inventories continue to draw, while gasoline inventories rise,” said Smith.

“All the while, crude from the [U.S. Strategic Petroleum Reserve] continues to find its way into commercial stocks,” he said. “U.S. oil inventories would be 32 million barrels lower if it weren’t for SPR releases this year—down over 110 million barrels from March’s record, rather than the 80 million barrels they are down now.”

U.S. crude production continued to edge higher, with total domestic output at about 9.7 million barrels a day last week, up 25,000 barrels a day, according to the EIA.

The Organization of the Petroleum Exporting Countries and its allies, including non-OPEC Russia, agreed last week to extend a deal to hold down crude output by nearly 2% through the end of next year. An extension had been largely priced in but rising U.S. oil production has been a key concern for the market.

Meanwhile, one of the world’s best-known oil traders, Pierre Andurand, who runs a big hedge fund specializing in the black gold, Andurand Capital, says rising demand will again be a factor. Back in September 2015, he forecast crude would slump to between $25 and $30, five months before prices dipped to around $26. He is now striking a remarkably upbeat tone on the commodity.

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