Oil Settles Lower on Profit-Taking

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled lower Thursday afternoon, with West Texas Intermediate crude oil contract pulling back from a 5-1/2-month high amid profit-taking and overbought market conditions.

"There was a little profit-taking after the WTI contract failed to take down resistance at $53, but I think it could make another run up by overnight," said analyst Phil Flynn at Price Futures. "It seems like the market was due for correction, but it's important to note that WTI has made new highs for the week so far and for the month and for the third quarter."

The futures complex had traded mixed with an upside bias earlier in the session, with WTI boosted by U.S. data showing a crude stock draw, and a dispute in Iraq that could lead to disruption of 500,000 bpd of crude oil exports from northern Iraq.

After Iraq's Kurdistan region voted overwhelmingly for independence in a referendum held on Monday, the Iraqi parliament responded late on Wednesday by approving legislations that would place all oil fields in the country and exports under federal government control.

The federal government in Baghdad is trying to stop the Kurds from declaring independence after Monday's referendum. Baghdad has asked neighboring countries such as Turkey to refrain from doing any business with the Kurdish regional government.

The Kurds have said they won't declare independence any time soon, and the referendum is only a basis for negotiation with Baghdad about their future.

The latest developments come days after Turkish government threatened to shut down the 500,000 bpd pipeline from northern Iraq to Turkey on concerns the referendum could stir up nationalism among the Kurdish population in Turkey. The Kurds export their oil via the port of Ceyhan on its Mediterranean coast.

"The Kurdistan oil is still flowing, so Iraqi tension is no longer an issue," said Flynn.

Meantime, the Energy Information Administration on Wednesday showed a 1.8 million bbl crude stock draw during the week-ended Sept. 22, as Gulf Coast refineries closed in the wake of Hurricane Harvey returned to near full operations, boosting refinery runs by 5.4% to 88.6% of capacity last week.

On products, EIA data showed gasoline supply climbed 1.1 million bbl, while demand for distillates fell 518,000 bpd during the week-ended Sept. 22.

Traders also squared their positons ahead of Friday's expiration of NYMEX October ULSD and RBOB plus November Brent crude trading on the ICE platform.

NYMEX November WTI crude settled 58cts lower at $51.56 bbl, reversing off a 5-1/2-month high of $52.86. November Brent futures crude on the ICE platform dropped 49cts to $57.41 bbl, with December contract down 41cts at $57.16. The Brent premium to WTI at $5.85 was up 9cts versus the close a day prior.

NYMEX October ULSD futures settled 1.43cts lower at $1.8320 gallon, with November contract down 1.47cts at $1.8243 gallon. October RBOB futures contract tumbled 2.222cts to a $1.6318 gallon settlement, with the November contract down 0.72cts at $1.6148 gallon.

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