Oil Mixed Ahead of EIA Supply Data

NEW YORK (DTN) -- New York Mercantile Exchange oil futures moved mixed with a downside bias ahead of the midmorning release of weekly domestic oil supply data by the U.S. Energy Information Administration that are expected to show a crude stock build and product stock draws.

A weaker dollar is providing support to the oil complex, although the market is expected to be choppy today as traders square their positions ahead of the afternoon expiration of the November ICE Brent contract.

Short-term domestic supply and demand disposition appears mixed while the global market is oversupplied.

At 8 a.m. CDT, the NYMEX November WTI futures contract was down 70 cents at $45.94 barrel, near a fresh one-week low of $45.83. ICE November Brent crude futures eased 40 cents to $48.75 bbl ahead of its expiration Thursday afternoon, with December contract down 33 cents at $49.36.

In products trade, NYMEX November ULSD futures eased 0.40 cents to $1.4793 gallon, while the NYMEX November RBOB futures contract edged up 0.35 cents to $1.3118 gallon.

On Wall Street, U.S. stock indices were higher across the board, tracking gains for European and Asian bourses, while the dollar index fell to a seven-week low.

Analysts said risk-on trade is underway in the equities market, driven by "bad news is good news" after weak economic data raised the prospects of a delay in a federal funds rate hike.

The number of first-time applicants for U.S. unemployment benefits fell by 7,000 to 255,000 during the week ended Oct. 10, the lowest level since 1973, the Labor Department said.

That positive jobs data is undermined by weak inflation after the consumer price index fell 0.2% in September. The Fed has said its decision to raise rates will depend on whether inflation is moving towards its targeted 2.0% rate.

The key issue for oil trade is supply, however. The American Petroleum Institute late Tuesday reported a bigger-than-expected weekly build in domestic crude oil stockpiles and sizeable drawdowns in oil product stockpiles.

The API's report for the week-ended Oct. 9 detailed a 9.348 million bbl increase in crude oil inventories while a survey projected a 1.3 million bbl build. Crude oil inventories at the Cushing, Oklahoma, supply terminal rose 1.4 million bbl for the week versus a draw of 1 million bbl predicted by pundits.

Gasoline stocks tumbled by 5 million bbl, double the expected 2.5 million bbl draw. Distillate stocks fell by 2.7 million bbl versus an expected 300,000 bbl decline. The EIA will release its weekly oil data at 10 a.m. CDT.

Globally, oil supply is running ahead of demand, with the Organization of Petroleum Exporting Countries producing above its agreed output ceiling of 30 million barrels per day.

Analysts said recent data suggesting the global economy is weakening could reduce oil demand. But at the same time, U.S. oil output is expected to drop through next year and narrow the global supply and demand balance.

George Orwel can be reached at george.orwel@telventdtn.com