Oil Futures Settle Higher Thursday

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled higher Thursday afternoon, with West Texas Intermediate crude shaking off early losses to settle at a six-month high after Saudi Arabian Crown Prince Mohammed bin Salman backed an extension of the ongoing oil production cuts by the Organization of Petroleum Exporting Countries and their 10 non-OPEC producer allies.

Prince Salman made the comments during an interview with Bloomberg in Riyadh. His comment echoed Russian President Vladimir Putin who said more than a week ago that he's open to extending their agreement that currently calls for 1.8 million bpd in total supply cuts through March 2018. They want the cuts extended to the end of 2018.

"The market took off when the Saudi Crown Prince reiterated that they are committed to higher oil prices," said analyst Phil Flynn at Price Futures Group. "But EIA's products data was also bullish, which helped prices, although a strong dollar curbed the upside."

Domestically, a mixed bag of weekly oil statistics showing higher crude supply and lower product reserves continued to concern traders. After four straight weeks of draws, crude stocks increased 856,000 bbl during the week-ended Oct. 20, Energy Information Administration data showed.

Crude oil production also rebounded, rising 1.1 million bpd to 9.507 million bpd last week and causing the spread between Brent and West Texas Intermediate crude prices to increase to above $6.33 three-week high.

A wider trans-Atlantic arbitrage incentivizes U.S. producers to export more crude since global supply is tightening, said analysts, and the spread between WTI and Brent crude on the Intercontinental Exchange has widened to one-month high. December Brent closed at a $6.66 premium to WTI this afternoon.

The EIA's products data were bullish, with EIA showing an unexpected distillate stock draw of 5.2 million bbl while gasoline stocks fell by a more-than-expected 5.5 million bbl during the week-ended Oct. 20.

"A very bullish overall report with total petroleum inventory draw of 12.5 million barrels as another 300,000 bbl came out of the SPR. Total petroleum demand returned to over 20 million bpd," said analyst Kyle Cooper at IAF Advisors.

The oil futures upside Thursday was, however, capped by a strong dollar, with the greenback rallying to a two-month high on expectations President Donald Trump will appoint a hawkish economist as the new Chairman of the Federal Reserve to replace Janet Yellen.

At settlement, NYMEX December West Texas Intermediate crude was 46cts higher at $52.64 bbl, off a one-month high of $52.72. ICE December Brent crude settled 86cts higher at $59.30 bbl, off a four-month high of $59.40.

NYMEX November ULSD futures rallied 2.37cts to a $1.8419 gallon settlement, off four-week high of $1.8440. November RBOB futures gained 1.58cts to $1.7506 gallon, near a $1.7572 two-month high.

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