NEW YORK (DTN) -- New York Mercantile Exchange spot-month West Texas Intermediate crude futures and Brent on the Intercontinental Exchange settled modestly higher Wednesday afternoon after paring early gains on a stronger U.S. dollar, while the RBOB contract posted better than 1.25cts gains for a second session and ULSD futures slipped.
The gains for WTI and Brent were underpinned by disruption to oil supply from Iraq's northern Kurdistan region, as well as federal data showing a steep drop in crude oil production in the United States during the week ended Oct. 13.
"The EIA data showing crude stock draw and perhaps the production drop was related to Hurricane Nate, and although I think the numbers were bullish, the production drop won't be repeated next week," said analyst Phil Flynn at Price Futures in Chicago. "The market is already tight, which is why we see this sensitivity to geopolitical risks. But again, we had a strong dollar today putting pressure on the market."
Reports said Kurdish oil production fell by half Wednesday for the second day running due to the conflict between the national Iraqi government and regional Kurdish government. Since embarking on a military campaign on Sunday, Iraqi troops have captured Kirkuk's biggest oil fields from Kurdish Peshmerga forces.
The fighting has kept workers away from those oil fields, cutting oil production and exports via a pipeline to Turkey's Ceyhan seaport by half to 250,000 bpd, according to reports citing port agents. Iraq is the second biggest oil producer within the Organization of the Petroleum Exporting Countries, with total output of 4.5 million bpd recorded in September, according to secondary sources cited in OPEC's Monthly Oil Market Report for October.
Iraqi skirmishes coincided with tension between the United States and Iran, the third biggest oil-producing member of OPEC, after President Donald Trump last week refused to certify the nuclear deal Iran signed with world powers in 2015.
Domestically, the U.S. Energy Information Administration reported Wednesday that commercial crude oil inventories tumbled by 5.7 million bbl during the week ended Oct. 13 to 456.5 million bbl and domestic crude output fell 1.0 million bpd to 8.406 million bpd.
However, EIA's products data were mixed, detailing gasoline supply rose 908,000 bbl and distillate supply climbed 528,000 bbl during the week reviewed. The increase in product supply despite sharply lower refinery runs fueled market worries about demand, with product demand declining by 344,000 bpd and 171,000 bpd, respectively, according to the EIA data.
NYMEX November WTI futures settled up 16cts at $52.04 bbl, holding below Monday's better than two-week high of $52.37 with a $52.33 print. December Brent crude on the ICE platform settled 27cts higher at $58.15 bbl. NYMEX November ULSD futures settled down 0.70cts at $1.8028 gallon. November RBOB futures climbed 1.28cts to a $1.6429 gallon settlement.
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