DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange settled Wednesday's session lower. The losses came despite government data showing October retail sales jumped well above expectations, the latest sign showing the resiliency of consumers despite a broader economic slowdown, and a bearish inventory report from the U.S. Energy Information Administration indicating domestic crude stockpiles jumped by more than 5 million barrels (bbl) last week even as refiners boosted run rates.

U.S. retail sales surprised in October with a 1.3% gain after an unchanged reading in September, according to data from Commerce Department published this morning. Americans spent more on everyday items such as gasoline and food, but they also shelled out more on discretionary spending such as cars, furniture, and restaurant meals. Some economists suggest the jump in October retail sales could be a sign of an early holiday shopping season.

Unlike many government reports, retail sales aren't adjusted for inflation and can reflect price increases in addition to total purchases. Inflation in October moderated to 0.4% from 0.6% seen over the previous month, which has brought an annualized increase in consumer prices to 7.7%.

Federal Reserve Governor Christopher Waller said on Wednesday it was too soon to conclude inflation had peaked or that the central bank would be able to end its rate increases early next year. Waller pointed to the summer months last year when inflation pressures appeared to be easing but later reaccelerated.

"We've seen this movie before, so it is too early to know if it will have a different ending this time," he said.

U.S. Federal Reserve raised the federal funds rate 0.75% this month, the fourth rate hike of this size in as many meetings in an effort to bring down inflation.

U.S. dollar weakened 0.14% on Wednesday to finish the session at 106.152, but lent little support for West Texas Intermediate futures, with the dollar and WTI having an inverse relationship index.

NYMEX December WTI futures dropped $1.33 to settle at $85.59 per bbl, and January Brent futures on ICE declined $1 to $92.86 per bbl. December RBOB futures on NYMEX ended down 0.81 cent at $2.5080 per gallon, with December ULSD futures $0.0255 lower at $3.6136 per gallon.

EIA's inventory report released Wednesday showed commercial crude oil stocks declined 5.4 million bbl from the previous week compared with expectations for a modest 500,000 bbl decline. The large drawdown was realized as domestic refiners boosted crude throughput to above 16 million barrels per day (bpd), up 63,000 bpd from the previous week. Refining utilization gained 0.4% last week to the highest level since mid-September at 92.9% of capacity.

Oil stored at Cushing, Oklahoma, the NYMEX delivery point for WTI, also decreased 1.6 million bbl to 25.6 million bbl, according to EIA.

In the gasoline complex, commercial stockpiles built for the first week since early October, up 2.2 million bbl to 207.9 million bbl, which is still 8% below the five-year average. Demand for gasoline fell last week by 269,000 bpd to 8.742 million bpd after reaching the highest weekly rate of the year of 9.465 million bpd at the start of October.

Distillate fuel consumption during the first full week of November decreased 298,000 bpd to a 3.863 million bpd eight-week low, while distillate stocks increased 1.1 million bbl to 107.4 million bbl and are now about 24% below the five-year average EIA data show. Nationwide distillate inventories have consistently run below the five-year average for much of the year, with strong exports and domestic demand drawing down stockpiles.

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