Oil Futures End Session Lower

OAKHURST, N.J. (DTN) -- New York Mercantile Exchange November oil futures and Brent crude on the Intercontinental Exchange dropped Thursday with crude futures tumbling off multi-year highs on profit-taking amid overbought technical indicators in addition to concerns about the impact of high oil prices on demand.

Oil futures pulled back following Wednesday's rally that lifted West Texas Intermediate and Brent crude to four-year highs that were instigated on concern over a tightening global oil supply-demand disposition as U.S. sanctions on Iranian oil sales take effect on Nov. 4.

Iran's oil exports are reported to have averaged 1.5 million bpd in September, down 800,000 bpd from a peak reached in the second quarter, and are expected to fall farther as U.S. sanctions intensify. Lost Iranian oil supply also comes as Venezuelan oil production continues to freefall amid an economic collapse.

On Wednesday, Saudi Arabian Energy Minister Khalid Al-Falih said the kingdom is producing 10.7 million bpd, near a record high, and would continue to boost output if the demand pull required the extra barrels. Media reports also said Russian oil production averaged at an 11.347 million bpd fresh post-Soviet high in September, and that output would continue to ramp up in the coming months.

U.S. crude production reached a record high 11.1 million bpd during the final two weeks of the third quarter the Energy Information Administration reported Wednesday, although greater output is seen limited by takeaway capacity constraints.

EIA also reported an 8.0 million bbl build in commercial crude stocks during the final week of the third quarter that lifted inventory to a 404.0 million bbl to a five-week high and even with the five-year average. Commercial crude stocks are down 61.0 million bbl or 13.1% against year prior, although the gap narrowed 14.0 million bbl during the last week of September.

Crude stocks increased even as the refinery run rate held flat at 90.4% on the week following prior week's 5.0% drop. U.S. crude exports tumbled 917,000 bpd from a nine-week high to 1.723 million bpd.

Oil futures are underpinned by a strong U.S. economy, with data for September released this week showing accelerating growth in manufacturing, services, and consumer spending. The market now awaits the Department of Labor's employment report for September due out Friday morning, with the market expecting job growth of 180,000 bpd for last month. On Wednesday, ADP Payroll Services said 230,000 jobs were added to the U.S. economy in September.

At last look, the dollar index was up slightly at 95.460 while the Dow Jones Industrial Index was down more than 1% on the session.

NYMEX November West Texas Intermediate crude oil futures dropped over 2.5%, falling $2.08 to settle at $74.33 bbl after trading from $73.88 to $76.47 bbl.

ICE December Brent crude was down $1.71 at $84.58 bbl, having traded as low as $84.14 bbl.

NYMEX November ULSD futures dropped nearly 1.5% to settle down 3.75cts to $2.3997 gallon while nearby delivery month RBOB futures fell 1.6% to $2.1004 gallon settlement, down 3.74cts from the prior session.