CRANBURY, N.J. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and the front month Brent contract on the Intercontinental Exchange were mostly lower following Tuesday's rally to one-week highs, consolidating ahead of the midmorning release of U.S. supply data for the second week of September, while October West Texas Intermediate options expire at the close.
The U.S. dollar remains under pressure, holding near Tuesday's nearly eight-week low, underpinning support for WTI futures since oil trades internationally in dollar denominations.
Late Tuesday afternoon, the American Petroleum Institute reported a 1.2 million bbl build in U.S. commercial crude stocks occurred during the week-ended Sept. 14 that was bearish compared to estimates for a drawdown between 2.5 and 2.7 million bbl.
The EIA last reported commercial crude stocks at 396.2 million bbl as of Sept. 7 that is 72.0 million bbl or 15.4% below the comparable year-ago period. EIA shows days of forward crude supply at 22.3, a three-year, seven-month low.
API said distillate fuel stockpiles increased 1.5 million bbl for the week profiled, which was near market estimates for a build between 700,000 bbl and 1.5 million bbl. Distillate stocks have increased sharply in the third quarter, up 21.7 million bbl or 18.5% since the end of June through the first week of September to 139.3 million bbl, EIA data shows.
The API report was bullish for gasoline, showing a 1.5 million bbl draw down during the week-ended Sept. 14 that ran contrary to market consensus for stocks to remain steady on the week. When comparing with year ago, the data will be bearish, with inventory drawn down sharply in September 2017 following Hurricane Harvey that idled several refineries and the Colonial Pipeline. EIA data shows gasoline inventory dropped 13.7 million bbl or 6.0% during the three weeks through Sept. 15, 2017 following Harvey's late August landfall.
Oil futures are trending higher on heightened geopolitical risk and a tightening global supply-demand disposition, with world consumption of crude greatest during the fourth quarter amid winter demand in the Northern Hemisphere.
"Yesterday's (Tuesday's) shooting down of a Russian plan in Syria that Russia's Russian President Vladimir Putin said was a "tragic chain of circumstances" but reserves the right to respond against Israel in the future keeps the geopolitical edge on this market," said Chicago-based Phil Flynn, senior market analyst with The PRICE Futures Group.
The early week event rallied oil futures after news hit the wires that Syrian air defense shot down the Russian reconnaissance plane in which 15 servicemen perished as Syria was attempting to repel an attack from Israel on Iranian targets. Russia and Iran are allied with Syrian President Bashar Assad in Assad's war with rebels. Israel has vowed to not allow Iran to develop a land base in Syria, and has carried out precision strikes in the country on Iranian assets.
Iran is also under pressure from U.S. sanctions that have degraded its economy more than initially anticipated. A second round of sanctions take effect on Nov. 5 that target Iran's oil exports and banking system, with an initial round taking effect in early August. According to Bloomberg, Iran's oil exports have dropped by 900,000 bpd since April to 1.6 million bpd in September.
NYMEX October WTI futures were up marginally at $69.95 bbl at 9 AM ET, and trading last look at $70.26 bbl, with its premium to November delivery widening slightly to $0.30 bbl. ICE November Brent futures were down $0.30 at $78.73 bbl.
NYMEX October ULSD futures were 1.27 cents lower at $2.2230 gallon at 9 AM ET, and have pared the decline at last look. NYMEX October RBOB futures were down 0.24 cents at $2.0025 gallon at 9 AM ET, and moved to near flat with Tuesday's settlement at last look.
Brian L. Milne can be reached at email@example.com
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