DTN Oil

CRANBURY, N.J. (DTN) -- Oil futures on the New York Mercantile Exchange nearest delivery and Brent on the Intercontinental Exchange ended mixed Thursday, with the ULSD contract advancing after Russia banned exports of gasoline and diesel.

Russia's press office said on its website temporary restrictions on gasoline and diesel exports would help saturate the fuel market that would lower prices for domestic consumers, according to Bloomberg. There was no end date for the restrictions, which took effect Thursday according to a government decree signed by Prime Minister Mikhail Mishustin.

The decree follows news earlier in September that Russia would reduce diesel loadings from ports on the Black and Baltic seas by about 135,000 bpd or 25% from August to 466,000 bpd this month amid strong domestic demand while Russian refineries undergo seasonal maintenance. Reports suggest Moscow is leery in allowing fuel prices to climb and further inflame inflation, which reached a 5.2% six-month high in August according to Trading Economics. Higher inflation could erode support for Moscow's unprovoked war with Ukraine, while presidential elections are slated for March.

Earlier in the session, Reuters reported seaborne exports of diesel and gasoil declined by nearly 30% during the first 20 days of September compared with the first 20 days in August to 1.7 million metric tons or 5.27 million bbl.

October gasoil futures on ICE rallied $0.1349 or 4.5% to $3.1217 gallon Thursday, with the export ban seen further tightening supply availability for distillate grade fuel. In the United States, distillate stocks were drawn down 2.9 million bbl to 119.7 million bbl during the second week of September, widening a deficit against the five-year average to 20.871 million bbl or 14.9%.

NYMEX October ULSD futures rallied to a $3.4781 gallon intraday high following the news on the Russian ban before paring the advance with a $3.3680 gallon settlement, up $0.0412. October RBOB futures ended trading flat at $2.6199 gallon. ICE November Brent crude settled $0.23 lower at $93.30 bbl.

The front month West Texas Intermediate contract on NYMEX moved to November delivery and settled little changed at $89.63 bbl, with early session gains erased on a strong dollar, which reached a six-month high of 105.440 in index trading against a basket of foreign currencies before settling at 105.044. One of those currencies is the British pound, which weakened on the session after the Bank of England left its main policy rate unchanged against expectations for a 25-point increase.

The dollar strengthened further after the Department of Labor reported first-time filings for unemployment insurance fell 20,000 to 201,000 during the week-ended Sept. 16, with the resiliency in the U.S. labor market illustrating economic strength. The strong labor market also suggests the Federal Reserve's goal of lowering inflation faces ongoing headwinds that could portend another rate hike.

Wednesday afternoon, the Federal Open Market Committee left the federal funds rate unchanged, holding in a 5.25% by 5.5% target range, but signaled another 25-basis point hike in the fourth quarter, based on the Fed's dot-plot projections. Furthermore, a majority of FOMC officials project two 25-basis point cuts in the federal funds rate in 2024, down from expectations for four, reconfirming the "higher for longer" mantra by Fed Chairman Jerome Powell and other central bank officials.

Projections can change, and the Federal Reserve Bank of Philadelphia Thursday morning released its Manufacturing Business Outlook Survey, with the diffusion index for general activity plunging in September, widely missing expectations. While a regional indicator, the slowdown in manufacturing illustrates an uneven U.S. economy, with the Atlanta Fed's GDPNow forecasting model showing the U.S. economy growing 4.9% in the third quarter, up from 2.1% in the second quarter.

An extended strike by 146,000 United Auto Workers against Detroit's Big Three -- General Motors, Ford, and Stellantis, could upend the U.S. economy. So far, UAW has targeted work stoppages at each of the Big Three's most profitable plants. Yet that looks likely to change at noon Friday (9/22), with the union indicating earlier this week it would expand the strike if substantial progress in negotiation discussions were not reached. Reports on Thursday afternoon suggest the automakers are digging in. Earlier this month, the Anderson Economic Group said a 10-day strike by UAW could cause a $5.6 billion loss in U.S. gross domestic product and push Michigan's economy into recession.

Brian L. Milne can be reached at brian.milne@dtn.com