Crude oil trading outlook: WTI futures drop on bearish EIA report

WTI futures slid after the US Energy Information Administration (EIA), reported unexpected and sizable builds for gasoline and distillates inventories, while crude stocks were drawn largely as expected.

WTI futures for October delivery on the New York Mercantile Exchange traded at $91.51 per barrel at 14:53 GMT today, down 1.34% for the day. Prices ranged from a nine-month low of $91.46 to $93.03 per barrel. The contract has dropped ~0.6% so far this week.

Meanwhile on the ICE in London, October Brent stood at $98.06 per barrel, down 1.11%, daily prices between a 16-month low of $98.02 and $99.47 per barrel. October Brent’s premium to its US counterpart widened to $6.55. The European contract dropped about 1% on Tuesday.

The EIA report, which covers the week through September 5, revealed crude inventories dropped 1 million barrels, largely meeting expectations of 1.1m-1.5m draw. The decrease extends the series of declining stocks to an 11th out of 12 weeks.

Production of crude logged a minor drop to 8.6 million barrels per day, up 11% on an annual basis. Net imports last week were 7.2m, down 9% on an annual basis, outlining the shift towards domestic production, in light of booming shale production in the US.

Meanwhile, stocks at Cushing, Oklahoma, the delivery point for the NYMEX West Texas Intermediate contract and the largest hub in the US, were little changed at 20.4m barrels, 14m barrles lower than a year ago. Oil at the Gulf Coast, however, are up ~9m barrels compared to last year.

Gasoline stocks surprisingly added 2.4m barrels, compared with expectations of no change or slight decrease, signaling the US is oversupplied with the fuel, pressuring crude lower. Meanwhile, distillates, a category which includes diesel and heating fuel, were up almost 4.1m barrels, compared with forecasts of a 0.6m-1m gain.

Refineries bumped up production, EIA logging a weekly refinery utilization rate of 93.9%, 1.5% up on annual basis and almost 10% more than two years ago. Gasoline production, however, was actually some 5% lower than a week ago at ~9m barrels daily, while distillates output averaged 5.1m, little changed from a week ago.