Oil Futures Lower on Crude Supply

NEW YORK (DTN) -- New York Mercantile Exchange oil futures remained under selling pressure Wednesday morning with traders recalibrating expectations in front of an oil supply report for the week-ended Nov. 10 due out at 10:30 AM ET from the Energy Information Administration.

The second day of broad-based selling comes on the heels of data from the American Petroleum Institute Tuesday showing a surprise build in crude oil and gasoline stockpiles. API's data detailed stock builds of 6.5 million bbl and 2.4 million bbl, respectively, for crude and gasoline versus estimates for draws of 3.25 million and 1.2 million.

The data showed a 2.5 million bbl stock decline for distillates versus an expected 1.0 million draw.

There is concern that as U.S. crude production continues to increase, it could negate efforts by the Organization of the Petroleum Exporting Countries to rebalance the market through their production cuts, which are set to expire in March 2018.

Discussions between Saudi Arabia and Russia to extend the OPEC and non-OPEC agreement to cut 1.8 million bpd output through December 2018 have been taking place over the past several weeks. However, Bloomberg reported today that Russia is wavering, as they are not convinced a decision to extend the output cuts should be reached during the next OPEC meeting scheduled for Nov. 30.

EIA's Weekly Petroleum Status Report last week showed U.S. crude oil production reached a 9.62 million bpd 2-1/2 year high during the week-ended Nov. 3, and EIA's Drilling Productivity Report released Monday forecast an 80,000 bpd increase in oil shale output for December to 6.174 million bpd.

The oil futures complex was also weighed down by the International Energy Agency's decision to cut its global oil demand forecast for 2017 and 2018, a bearish move that negated a bullish report issued Monday by OPEC.

The IEA revised down its demand outlook by 50,000 bpd for 2017 and by 190,000 bpd for 2018. The 2017 revision was skewed toward the fourth quarter, which was revised down by 311,000 bpd due to a slow start to winter weather in the Northern Hemisphere.

At 9:00 AM ET, December West Texas Intermediate crude oil futures moved 50cts lower to $55.20 bbl. The short-term trend is down with initial support for WTI at $54.17.

January Brent dropped 95cts to $61.62 bbl on the Intercontinental Exchange, trading at a $6.42 bbl premium to WTI. NYMEX December ULSD futures declined 1.04cts to $1.8966 gallon and December RBOB futures dropped 2.40cts to $1.7372 gallon.