DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange reversed earlier losses to settle mixed Wednesday. The Organization of the Petroleum Exporting Countries revised lower their demand projections for this year despite an uptick in gas-to-oil switching in European Union and Asia, while oil traders awaited the release of weekly inventory data from the American Petroleum Institute with expectations for U.S. crude and gasoline stockpiles to rise during the week ended Oct. 8.

Wednesday afternoon oil traders positioned ahead of the inventory data release from the American Petroleum Institute that was delayed by one day due to the public holiday Monday. U.S. crude-oil stockpiles are expected to increase by 900,000 barrels (bbl) for the week ended Oct. 8, with forecasts ranging from a decline of 2.5 million bbl to an increase of 3 million bbl. Gasoline stockpiles are expected to rise by 600,000 bbl from the previous week; stocks of distillates are expected to fall 1.1 million bbl from the previous week. Refinery runs likely remained unchanged on the week at 89.6% of capacity.

The closely watched report from the U.S. Energy Information Administration is scheduled for release at 11 a.m. EDT Thursday. In its Short-Term Energy Outlook released Wednesday afternoon, the agency said U.S. oil output is going to fall more than previously expected in 2021 and bounce back in 2022. U.S. oil production will drop 260,000 barrels per day (bpd) to 11.02 million bpd this year, and then rebound to 11.73 million bpd in 2022. As crude output falls this year, consumption of petroleum products is expected to rise less than previously expected, according to the report.

Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) released their Monthly Oil Market Report this morning, estimating global oil demand growth this year slowed to 5.8 million bpd from 5.96 million bpd. The downward revision is mainly driven by lower-than-expected data for the first three quarters of this year, despite healthy oil demand assumptions for the fourth quarter, which OPEC assumes will be supported by a seasonal uptick in petrochemical and heating fuel demand and the potential switch from natural gas to petroleum products due to high gas prices.

On the supply side, production growth outside of OPEC is revised down by 300,000 bpd from the previous month's assessment to 700,000 bpd this year. The revisions were driven mainly by a downward adjustment in the third quarter due to factors such as production outages in the U.S. Gulf of Mexico caused by Hurricane Ida; maintenance in the Tengiz field in Kazakhstan; and a force majeure in Canada at the Suncor oil sands site.

In outside markets, the U.S. dollar declined and stocks on Wall Street pushed higher on the inflation reading for September which accelerated to 5.4% from last year, up from the 5.3% pace in August and near the highest levels since 2008. That is the same rate as in June and July as the economy reopened, and slightly higher than in August. The so-called core price index, which excludes the often-volatile categories of food and energy, in September climbed 4% from a year earlier, the same rate as in August. In minutes released Wednesday, Federal Reserve officials said last month global supply disruptions were raising the risks of more persistent inflation as they firmed up plans to conclude their bond-buying stimulus program by the middle of next year. Unusually high demand is a crucial factor driving higher inflation. Spending jumped at an 11.9% pace in the second quarter as more people received COVID-19 vaccinations, businesses reopened and trillions of dollars in federal aid coursed through the economy. Consumer spending continued to surge in August.

On the session, West Texas Intermediate November futures slipped 0.16 cent to finish near a seven-year high at $80.44 (bbl), and the international crude benchmark Brent contract for December delivery eased $0.24 to finish at $83.18 bbl. NYMEX ULSD November contract advanced 1.11 cents to $2.5211 gallon, and front-month RBOB rallied 2.26 cents to $2.4055 gallon.

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