Oil trading outlook: WTI futures erase daily gains on bearish US supply data

US crude fell sharply on news that stockpiles in the United States rose more than expected the week ended April 18th, erasing earlier gains. Brent also felt negative sentiment and slid to session low.

On the New York Mercantile Exchange WTI futures for June delivery traded at $101.72 per barrel at 15:20 GMT, losing 0.02% for the session so far, having erased significant gains earlier. Daily high and low stood at $102.08 and $101.20 per barrel, respectively. Yesterday futures dropped 1.83%.

Meanwhile, on the ICE, Brent futures for June settlement lost 0.32%, trading at $108.93 per barrel. High and low for the day were registered at $109.54 and $108.85 per barrel, respectively. Premium for the European benchmark against WTI stood at $7.21.

US crude plunged toward negative daily territory as the Energy Information Administration revealed worse-than-expected crude and refined products supply figures, signaling strong bearish outlook. Crude supplies rose by 3.524 million barrels to 397.7 million, the highest on record, exceeding expectations of a 2.3-million barrels increase.

US crude imports stood at 7.8 million barrels per day for the week through April 18th, down 475,000 barrels from the previous five-day period.

Domestic crude production registered at 8.360 million barrels per day, 59 000 higher than last week’s figure. Refinery utilization rate also picked-up pace, to score 91.0%, up from last week’s 88.8%. Gasoline production, however, decreased last week, averaging 8.9 million bpd, while distillate fuel output picked up to 5.0 million barrels per day.

The only bullish sign for oil coming from the report was that supplies at Cushing, Oklahoma, dropped to 26.0 million barrels, down 800,000 from last week’s reading. This was the lowest level since October 2009. The decline, however, is in-line with recent outflows from Cushing and towards the Gulf coast.

Motor gasoline and distillates figures also fanned significantly negative sentiment, with gasoline inventories having dropped by 0.274 million barrels for the week, far below the expectation of a 1.713-million decline, while distillate fuels gaining 0.597 million barrels in supplies, in contrast to a forecast of a 0.463-million decline.

Earlier, bearish estimates on US oil stocks, ahead of the upcoming EIA report, pressured West Texas Intermediate. The US benchmark was also down on news that manufacturing activity in China registered a lower-than-expected PMI. According to HSBC’s preliminary report, the Chinese manufacturing PMI recorded at 48.3 for April, in contrast with a 48.4 forecast. This translates to a slightly lower-than-before pace of slowdown in the world’s second oil consumer, but also boosts negative sentiment, as the reading is worse than the forecast and is still well-below the “50” contraction-expansion figure.

“China is slowing down and that’s a concern, but people don’t expect it to fall off a cliff,” said for Reuters Tony Nunan, oil risk manager at giant Mitsubishi Corp; “Going by fundamentals and without the current risk premium on oil, Brent should be closer to $100 a barrel with the U.S. benchmark around $90.”

Elsewhere, Ukraine remains an important support for Brent, as tensions there don’t seem to cool down. The failed measures of the Geneva talks last week partially countered bearish reports from China and the US, as American secretary of state John Kerry threatened further sanctions against Russia. Ukraine’s interim president Oleksandr Turchynov announced two men – including a politician from his party, were found dead with signs of brutal torture. This comes three days after fatal shooting at a militia-controlled checkpoint, which prompted Russian Foreign Minister Sergei Lavrov to blame the Ukrainian government of inciting the violence and failing to, or not wanting to, implement the Geneva measures.