CRANBURY, N.J. (DTN) -- Oil futures next to expire on the New York Mercantile Exchange rallied Wednesday and the nearest delivered Brent contract on the Intercontinental Exchange edged higher, following bullish U.S. oil supply data released midmorning from the Energy Information Administration. The EIA data showed another decline in domestic crude stocks and a jump in U.S. crude exports during the second week of September.
NYMEX October West Texas Intermediate futures settled at a 10-week high on the spot continuation chart and above $71 bbl for the first time since early July, while oil products and Brent futures settled at one-week highs despite holding within Tuesday's trade ranges.
Wednesday's trade focused on the EIA report, although the weekly data reflects against a broader global context of a tightening market in the fourth quarter.
EIA reported the fifth consecutive weekly drawdown in commercial crude supply through Sept. 14, with the 2.1 million bbl decline pressing stocks to a three-year, seven-month low at 394.1 million bbl. Crude supply is down 78.7 million bbl or 16.6% against year ago.
Prompting the draw was a 539,000 bpd jump in U.S. crude exports to 2.367 million bpd, an eight-week high. An open arbitrage window drove the foreign oil sales, with WTI futures falling to a nearly $10 bbl discount against Brent last week. November WTI futures settled at an $8.63 bbl discount to November Brent Wednesday.
In mid-August, U.S. crude exports had fallen to 1.155 million bpd, the lowest rate since the first week of 2018. Soon after, the WTI discount to Brent widened to more than $6 bbl, up from the roughly $4 bbl range traded during much of July. The spread continued to widen as market followers fixated on declining Iranian oil exports amid U.S. sanctions that took effect in early August with a second round to take effect in early November, which supports Brent.
WTI's discount to Brent accelerated in September following the end of peak gasoline demand during the summer months in the United States on expectations crude stocks would build as refiners shut for maintenance. While in the very early stages of the fall refinery-maintenance season, with Thursday the last day of summer, crude stocks have continued lower. Some market followers believe the ability to export crude, with restrictions ended in December 2015, has upended the traditional seasonal feature when crude stocks build during refinery turnarounds in the fall and spring and products draw on inventory.
U.S. refiner crude inputs did decline from the summer's rapid pace, down 442,000 bpd or 2.5% last week to 17.415 million bpd, which compares with a summer average at 17.6 million bpd.
The strong processing rate at U.S. refiners have worked to erase a wide year-on-year deficit in distillate fuel, which increased 800,000 bbl to 140.1 million bbl during the week ended Sept. 14, now 1.3 million bbl above year ago. During the first week of January, distillate fuel was 26.94 million bbl or 15.8% above year ago. Days of forward distillate supply at 34.7 moved above year ago for the first time in 2018 last week, with the supply buffer the most since early February.
The year-on-year comparisons also reflect the effects Hurricane Harvey had on the industry, with the storm and flooding shutting refineries in the country's refining center in the Gulf Coast.
RBOB futures were boosted by the 1.7 million bbl draw during the second week of September to 234.2 million bbl, but the year-on-year comparison widened to an 18.0 million bbl or 8.3% supply surplus.
NYMEX October WTI futures settled up $1.27 at $71.12 bbl, and widened its premium against November delivery to $0.35 bbl, suggesting short covering ahead of Thursday's October contract expiration.
A softer U.S. dollar near an eight-week low in index trading against a basket of currencies also lent support for WTI futures.
ICE November Brent crude settled up $0.37 at $79.40 bbl.
NYMEX October ULSD futures settled 1.09cts higher at $2.2466 gallon, and the October RBOB contract gained 1.58cts with a $2.0207 gallon settlement.
Brian L. Milne can be reached at firstname.lastname@example.org
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