DTN Oil

WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled lower for the second consecutive session on Wednesday after reports indicated the Organization of the Petroleum Exporting Countries in consortium with Russia-led partners could increase oil production above previously agreed targets as early as next week to meet rising demand for petroleum products in Europe and Asia. An unexpected build in U.S. commercial crude oil inventories reported by the government at midmorning further weighed on prices.

On the session, NYMEX November WTI futures slid $0.46 to settle at $74.83 barrel (bbl), with losses accelerating post-settlement under pressure from a surging U.S. Dollar Index that rallied to a 94.440 one-year high Wednesday afternoon before settling up 0.6% at 94.353.

ICE November Brent continued its retreat from Tuesday's $80.75 bbl 35-month high on the spot continuous chart to finish at $78.64, down $0.45 ahead of expiration Thursday afternoon, with the December contract settling at a $0.543 discount to the expiring contract in the backwardated market.

In contrast, oil products gained with NYMEX October ULSD futures advancing 1.85 cents to settle at $2.3075 gallon ahead of expiration Thursday, with the November contract ending at a 28-point discount to October delivery. October RBOB futures moved 2.74 cents higher to $2.2293 gallon, with November delivery settling at a 5.43 cents discount in the seasonally backwardated market ahead of the October contract's expiration Thursday afternoon.

The technical panel for OPEC+ Joint Ministerial Monitoring Committee held its monthly meeting Wednesday to analyze recent market developments and issue guidelines for the OPEC/non-OPEC ministerial meeting scheduled for Monday, Oct. 4. No official documents were released, but reports indicate OPEC+ ministers may consider raising production in November above its 400,000 barrels per day (bpd) agreed target to meet rising fuel demand from Europe and Asia. OPEC+ agreed in July to increase production by 400,000 bpd each month until December, gradually phasing out the remaining 5.8 million bpd in cuts introduced in March 2020.

The OPEC+ Joint Technical Committee sees the oil market in a 1.1 million bpd deficit this year, assuming demand growth of about 6 million bpd. It assumes demand growth of 4.2 million bpd next year. A rapidly evolving energy crisis in Europe and China might have changed those calculations, according to analysts, as a record run in gas and coal prices likely boosted demand for oil-powered electricity generation this winter.

Wednesday's inventory report from the Energy Information Administration was mostly bearish, showing across-the-board builds in domestic crude and petroleum products supplies and a slow recovery in refinery runs following this month's disruptions caused by Hurricane Ida.

U.S. commercial crude oil inventories unexpectedly increased 4.6 million bbl in the week ended Sept. 24 compared with calls for a 2.5 million bbl drawdown. At 418.5 million bbl, commercial crude oil inventories currently stand about 7% below the five-year average after a nearly two-month destocking period. Domestic producers raised output by 500,000 bpd last week to 11.1 million bpd as operators in the offshore U.S. Gulf of Mexico continue to recover from Hurricane Ida-caused shut-ins.

Distillate stocks increased 384,000 bbl to 129.7 million bbl last week, while demand for distillate fuels, often seen as a proxy for economic activity, slipped below 4 million bpd.

The bullish parts of the report could be found in gasoline data that showed a smaller-than-expected 193,000 bbl increase in stocks last week, while demand for motor gasoline jumped to 9.399 million bpd -- the highest weekly demand rate since the Labor Day holiday. EIA's implied gasoline demand calculation aligns directionally with DTN's Refined Fuels Demand data showing gasoline demand in the United States increased 1.4% last week.

Liubov Georges can be reached at liubov.georges@dtn.com