Oil Futures End Mixed on Profit-Taking

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures and Brent on the Intercontinental Exchange settled mixed Tuesday afternoon after seesawing most of the session, with the ULSD contract pulling back on profit-taking after a two-day rally pushed prices close to a three-week high.

NYMEX West Texas Intermediate crude and Brent on the Intercontinental Exchange settled little changed after giving back early gains on easing geopolitical concerns alongside the expiration this afternoon of the options for the November WTI contract.

"The options contracts on WTI expired, so there was a lot of rollover pressure with people shifting from November to December contract," said analyst Phil Flynn at Price Futures. "The Kurdish troops also pulled back, so the Iraqi tensions have eased. People are now getting ready for the API inventory report."

The futures rally on Monday through early Tuesday was spurred by fighting in Iraq and tensions between the United States and Iran.

The Iraqi army said early Tuesday that they seized more territory from the Kurds on the second day of their military campaign against Kurdish Peshmerga fighters. The Kurdish troops abandoned Khanaqin and Kirkuk cities, a move that allowed Iraqi troops to enter Kirkuk and briefly shut Bai Hassan and Avana oil fields that produce more than 270,000 barrels per day (bpd) of crude oil. By afternoon, Iraqi troops had completed their takeover of all oilfields held by the Kurdish separatists and Kirkuk oil production resumed, easing supply concerns.

Northern Iraq produces 600,000 bpd of crude oil, of which 500,000 bpd is exported to Europe by pipeline via Turkey. This swift military operation by Iraq follows the Kurdish independence referendum last month that infuriated Baghdad.

Iraq is the second largest oil producing member of the Organization of the Petroleum Exporting Countries. Iraq produced about 4.5 million bpd in September, according to OPEC's Monthly Oil Market Report that cited secondary sources.

The incident added to rising geopolitical tensions, with the market worried the United States would re-impose tough sanctions on Iran after President Donald Trump on Friday refused to certify that Iran complied with the terms of their 2015 nuclear deal with world powers. Iran, also a member of OPEC, said Trump's sanctions threats would not hurt its oil industry.

Domestically, a DTN survey shows the market estimates stock draws of 7.75 million barrels (bbl) for crude for the week-ended Oct. 13, with gasoline and distillate stocks seen down 1.0 million bbl and 1.75 million bbl, respectively. American Petroleum Institute will release its oil data at 4:30 p.m. EDT while the Energy Information Administration's statistics are due at 10:30 a.m. EDT Wednesday.

NYMEX November WTI futures settled up a penny at $51.88 bbl, holding below Monday's better-than-two-week high of $52.37. December Brent crude on the ICE platform was 6 cents higher at a $57.88 bbl, closing at a $6.00 bbl one-week high premium to WTI.

NYMEX November ULSD futures settled down a fractional 0.31 cent at $1.8098 gallon. November RBOB futures gained 1.32 cents on the session with a $1.6301 gallon settlement.

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