Oil Futures Pare Advance From Highs

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and the front month Brent contract on the Intercontinental Exchange traded at fresh intraday highs Tuesday, although pared the advance after U.S. President Donald Trump said the Organization of the Petroleum Exporting Countries were "ripping off the rest of the world" during a speech at the United Nations General Assembly Tuesday.

Trump's comments follow a meeting Sunday between OPEC and 10 non-OPEC oil producing countries led by Russia that maintained a production agreement despite calls from the president to lift output to lower oil prices in the face of falling output from Venezuela and declining Iranian oil exports amid U.S. sanctions. The OPEC, non-OPEC contingent did agree to lift output to meet the quota targets, with production about 600,000 bpd below their agreement in August.

While moving off intraday highs, Brent and ULSD futures settled at nearly four-year highs, West Texas Intermediate futures at an 11-week high, and the RBOB contract at a nearly four-week high.

Trump also trained his ire on Iran, saying world leaders should work alongside the United States in isolating Iran. He said the United States was ratcheting up the economic pressure on Tehran to halt their political and militaristic interference in the Middle East. The president also targeted the leaders of Syria, Venezuela and China for their "rogue behavior."

The United States reimposed sanctions on Iran in early August, with a second and more robust round of sanctions targeting Iranian oil exports and its banking sector to take effect in early November.

Following OPEC's meeting on Sunday, Saudi Arabian energy minister Khalid al-Falih said Saudi oil production has increased this month from the 10.401 million bpd produced in August, and that output would again climb in October. While not offering numbers, the kingdom's top oil official said the country would take their cue from demand, according to a report from SP Global.

Domestically, the market expects commercial crude inventory to have declined for a sixth consecutive week during the third week of September when weekly data is released this afternoon by the American Petroleum Institute and Wednesday morning by the Energy Information Administration.

The market expects U.S. crude inventory to have been drawn down by about 1.6 million bbl during the week-ended Sept. 21. EIA reported crude stocks at a 394.1 million bbl 43-month low on Sept. 14, down 78.7 million bbl or 16.6% against the comparable year-ago period.

Gasoline stocks are estimated to have increased about 750,000 bbl during the week profiled that compares bearishly against year prior, when the effects of Hurricane Harvey on the Gulf Coast refinery center triggered steep supply drawdowns. Distillate inventory are seen to have increased by 500,000 bbl for the week profiled, which would mark the fourth consecutive build if realized.

ICE November Brent settled up $0.67 at $81.87 bbl, the highest settlement on the spot continuous chart since early November 2014, while ending at a $0.61 premium to December delivery ahead of the November contract's expiration Friday afternoon.

NYMEX November WTI futures settled up $0.20 at $72.28 bbl, easing $0.50 from a fresh 11-week spot intraday high. WTI's discount to Brent widened to $9.59 bbl.

NYMEX October ULSD futures settled at $2.3053 gallon, up 1.94 cents, and at the highest settlement since late November 2014 ahead of its expiration Friday afternoon. On an intraday basis, the expiring contract traded at a $2.3159 gallon high. The November contract settled at $2.3097 gallon.

NYMEX October RBOB futures settled higher for a third consecutive session, up 1.3 cents at $2.0677 gallon, ending at a 1.22 cents premium to November delivery ahead of its expiration Friday afternoon. For a second straight session, RBOB futures narrowed the seasonal gap on the spot continuous chart carved out following the expiration of the September contract on Aug. 31 with a $2.0748 intraday high, with the gap running up to $2.1076.

Brian L. Milne can be reached at brian.milne@dtn.com

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