Oil Settles Lower Thursday

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled mostly lower Thursday as traders booked profits after U.S. data showed an increase in U.S. product supply with the downside curbed by a hint from the Organization of the Petroleum Exporting Countries that ongoing production cuts could be extended through the end of 2018.

"It was a bit of profit-taking today after we much had a run-up over the past four days," said Houston-based analyst Andy Lipow. "The market is taking a breather, pausing to see if Iraq's takeover of Kurdish oil fields and short-term shutdown of some production will lead to long term disruption."

In Iraq, Kurdish oil exports are now less than half of the pipeline to Turkey's 500,000 bpd capacity, with Reuters and CNBC reporting the exports were fluctuating near 200,000 bpd this afternoon. This is lower than the oil flow rate seen overnight through early this morning. Disruption began on Tuesday due to the shutdown of the 350,000 bpd production from Bai Hasan and Avana oilfields.

The Peshmerga fighters today retreated from their recent positions and back to the areas the Kurds held in 2014. The conflict began Sunday but was prompted by the Sept. 25 Kurdish referendum. The routing of Kurdish fighters may bring a quick end to the skirmishes, said analysts.

OPEC Secretary General Mohammad Barkindo said today that a balanced oil market is within sight as leading producers are complying with their agreement to cut output by 1.8 million bpd. He said OPEC and its non-OPEC producer allies are building a consensus on extending the supply deal through December 2018, with most of the cartel members taking cue from Russia and Saudi Arabia.

In the United States, the Energy Information Administration on Wednesday reported unexpected domestic stock builds for oil products and a big stock draw for crude oil.

The report for the week-ended Oct. 13 showed gasoline inventories rose 908,000 bbl to 222.3 million bbl. Distillate inventories rose 528,000 bbl to 134.5 million bbl from a 28-month low at 1.34 million bbl seen the prior week.

NYMEX November ULSD futures settled 2.61cts lower at $1.7767 gallon, off $1.7685 a four-day low. November RBOB futures bucked the downtrend, settling up 0.18cts to $1.6447 gallon after paring gains from a three-week high of $1.6588.

NYMEX November West Texas Intermediate futures settled 75cts lower at $51.29 bbl ahead of the contract's expiration at the close of trade on Friday (10/20). The December WTI contract also settled 75cts lower at $51.51 bbl, holding a modest 22cts premium to the expiring November contract.

December Brent crude futures on the Intercontinental Exchange settled 92cts lower at $57.23 bbl, settling at a $5.94 bbl premium to WTI. Brent's premium to WTI shows a tightening global oil market and Middle East tensions have supported the international crude price marker.

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