DTN Oil

WASHINGTON, D.C. (DTN) -- Nearby month oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange pushed higher Tuesday, lifting U.S. crude benchmark towards $85 per barrel (bbl) as traders await weekly inventory data from the American Petroleum Institute. They are looking for additional clues on supply and demand balances at the Cushing storage hub in Oklahoma -- the biggest U.S. crude depot, where stockpiles are quickly being drawn down and seen moving toward critically low levels.

U.S. Energy Information Administration reported last week storage tanks at Cushing, the delivery point for West Texas Intermediate futures, fell to the lowest level since October 2018 at 31.2 million bbl, and are expected to decrease further in the fourth quarter amid the seasonable uptick for winter fuel demand. Domestic production, meanwhile, remains about 200,000 barrels per day (bpd) below pre-Hurricane Ida output rate, with operators once again reducing production almost two months after Ida's late-August landfall along the Louisiana coastline. The unexpected drop in domestic production coincides with the decline in the number of oil-targeted rigs in the United States, often seen as a proxy for future supplies.

Traders speculate that Cushing stockpiles are quicky approaching operational low levels, which could prompt oil traders to turn even more bullish. Historically, Cushing inventories have been seen as a good barometer for how tight the physical market is, while heavily affecting WTI's market structure, with the six-month calendar spread widening to $7.23 bbl at settlement -- near Friday's (Oct. 22) $7.32 bbl better-than eight-year high.

The American Petroleum Institute will release its weekly inventory report at 4:30 p.m. ET, followed by official figures from the EIA Wednesday morning. Nationwide commercial crude oil inventories are expected to have increased 500,000 bbl in the week ended Oct. 22, with gasoline inventories seen falling by 1.8 million bbl and stocks of distillates anticipated to have been drawn down 2.1 million bbl. Refinery run rates likely rose by 0.2% from the previous week to 84.9% of capacity.

On the session, NYMEX WTI futures for December delivery rallied $0.89 to settle at $84.65 bbl, and the international crude benchmark Brent Crude contract advanced to $86.40 bbl. NYMEX November RBOB finished little changed at $2.5168 gallon and front-month ULSD futures advanced 1.26 cents to $2.5773 gallon at settlement.

Oil futures came under mild selling pressure earlier in the session amid concerns over slowing economic growth domestically and internationally, with investors now waiting for Thursday's release of U.S. third-quarter gross domestic product. Consensus calls for the economic growth rate to have fallen to 2.7% during the July-to-October period, down 4% from the prior three months. The Atlanta Federal Reserve Bank is less optimistic on third-quarter growth, estimating GDP gained a mere 0.5% on an annualized basis, down from a 1.2% expansion rate seen on Oct. 15. A mix of high inflation and weaker economic growth have given way to concern over the prospect for stagflation -- an unusual set of economic conditions last seen in the 1970s in which inflation is high while demand stagnates.

Consumer confidence improved slightly in October, according to Conference Board data released this morning, after sputtering at the end of the summer.

"Consumer confidence improved in October, reversing a three-month downward trend as concerns about the spread of the Delta variant eased," said Lynn Franco, senior director of Economic Indicators at The Conference Board. "While short-term inflation concerns rose to a 13-year high, the impact on confidence was muted. The proportion of consumers planning to purchase homes, automobiles, and major appliances all increased in October -- a sign that consumer spending will continue to support economic growth through the final months of 2021."

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