Market Report & Analysis for 3/4/2019 Morning Edition

Morning Market Overview

Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange ended trading on the final day of February the way the session began, shallowly mixed, as the April Brent, March ULSD and March RBOB futures contracts expired.

The contracts mostly consolidated following two sessions of gains supported by tightening global market conditions led by production cuts by the Organization of the Petroleum Exporting Countries, with the advance accelerating after data released midweek showed U.S. crude imports slid to a 23-year low and commercial crude stocks in the United States unexpectedly plunged 8.6 million bbl to a four-week low last week. Energy Information Administration data for the week-ended Feb. 22 also detailed a sharp narrowing in year-on-year crude and gasoline oversupply and strong implied demand for oil products domestically and by foreign buyers.

The United States was a net exporter of oil during the week for only the second week on record, with implied demand for oil products running at a quicker pace than in 2018 through late February, up 269,000 bpd or 1.3%. EIA showed implied distillate demand cumulatively through Feb. 22 at 4.205 million bpd, 91,000 bpd or 2.2% above the comparable year-ago pace, an indication of a strong economy.

Macroeconomic statistics released today demonstrated a U.S. economy on solid footing, with delayed data from the Bureau of Economic Analysis estimating fourth quarter annualized growth at a greater-than-expected 2.6%. The growth rate slowed from third quarter’s 3.4% pace, while BEA said the U.S. economy expanded at a 2.9% annualized rate, above the 2.2% growth rate for 2017. Also defying market expectations, the Chicago Purchasing Managers Index spiked from 56.7 in January to 64.7 in February, a 14-month high, and contrasting with estimates that the index would decline to 56.1.

Reflecting a tightening global oil market and less crude being sent to U.S. shores, NYMEX West Texas Intermediate crude futures settled at its second highest settlement of 2019 at $57.22 bbl, up $0.28, even though domestic production reached a 12.1 million bpd record high last week, per EIA statistics.