Oil Pulls Back From Tuesday Highs

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and the front month Brent contract on the Intercontinental Exchange pulled back from Tuesday's highs after U.S. President Donald Trump told the United Nations General Assembly Tuesday that the Organization of the Petroleum Exporting Countries "were ripping off the rest of the world," and indications that the United States would ensure a well-supplied global oil market later this year as U.S. sanctions targeting Iranian oil exports take effect.

Oil futures also eased as reports cited Saudi Arabia's energy minister, Khalid al-Falih, in saying the Kingdom's oil production increased in September from August's 10.401 million barrels per day (bpd) output rate, and would increase again in October as customers have asked for more oil. The energy minister said it would increase supply based on customer demand, and indicated the Saudis have ample spare capacity to meet growing demand requirements because of lost oil sales from Iran amid U.S. sanctions and unabated decline in Venezuela's oil production.

Reports indicate India, a top customer of Iran, has not purchased any oil from Iran for November delivery.

Russia, with crude oil production at 11.6 million bpd in August according to statistics from the International Energy Agency, said it could increase its output rate.

In late October, early November, the United States will release 11.0 million barrels (bbl) of oil from the Strategic Petroleum Reserve to U.S. oil refiners that won bids on the supply in August. The timing of the release coincides with the Nov. 4 imposition of U.S. sanctions on Iranian oil exports, which are down 500,000 bpd from April to 1.6 million bpd in August, according to the IEA.

Oil futures were also pressured on news that Plains All American would provide expanded capacity on its Sunrise oil pipeline in early fourth quarter that is six months ahead of schedule, adding 90,000 bpd of crude flow from Midland, Texas, helping to relieve the pipeline bottleneck in western Texas. The additional pipeline flow could boost U.S. crude export.

Late Tuesday, the American Petroleum Institute reported an unexpected 2.903 million bbl build in commercial oil stocks for the week-ended Sept. 21 that contrasted with market estimates for a 1.6 million bbl drawdown. Gasoline inventory increased 949,000 bbl during the week profiled said API, which was in line with market estimates, and a 944,000 bbl drawdown in distillate stocks that was bullish compared with estimates for a 500,000 bbl build.

The Energy Information Administration will release its weekly data compilation at 10:30 a.m. ET.

The U.S. dollar strengthened to a nearly one-week high in index trading Wednesday morning ahead of an afternoon announcement by the Federal Reserve on monetary policy, with the Fed widely anticipated to hike the federal funds rate 25 basis points to 2.0% to 2.25%.

At 9 a.m. ET, Nymex November West Texas Intermediate futures were down $0.44 at $71.84 bbl, and ICE November Brent was $0.50 lower at $81.37 bbl, trading at a nearly $0.65 premium to December delivery. Nymex October ULSD futures were down 1.07 cents at $2.2946 gallon, trading at a 0.41 cents discount to November delivery, with Nymex October RBOB futures 1.52 cents lower at $2.0525 gallon. November RBOB delivery is at a 1.2 cents discount to the October contract.

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

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