Oil Futures Move Off Lows

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and the Intercontinental Exchange Brent contract settled shallowly mixed, with ULSD and the crude grades moving off one-week lows and the RBOB contract a two-week low traded overnight on short covering. The crude grades ended slightly lower and oil products edged modestly higher.

Oil futures swung to their lows on news that the United States was actively considering waivers from U.S. sanctions on Iranian oil exports for India, and is considering requests from other buyers of Iran’s oil. India complained that high oil prices would slow the country’s economic growth, with India the world’s largest democracy.

The United States will impose a second round of sanctions on Iran on Nov. 4 that target the country’s oil exports and banking sector, with an initial round of sanctions taking effect in early August. U.S. officials have spanned the globe, telling buyers of Iranian oil that they would face financial punishment if they didn’t stop those purchases by the Nov. 4 deadline. Iran’s oil exports are estimated at 1.5 million bpd in September, down about 700,000 to 800,000 bpd from the second quarter.

Backstopping the bearish news, Saudi Arabian Crown Prince Mohammed Bin Salman said Saudi Arabia was producing near a record high at 10.7 million bpd, and could lift production to 12.0 million bpd if necessary to offset lost Iranian oil barrels.

ICE December Brent settled down $0.25 at $83.91 bbl, paring a decline to $82.66 bbl. NYMEX November WTI futures settled down $0.05 at $74.29 bbl, erasing most of the loss to a $73.07 one-week low.

Session losses for the WTI contract were nearly erased on light short covering as offshore drillers in the Gulf of Mexico begin precautionary shut-ins ahead of Tropical Storm Michael.

Tropical Storm Michael “is forecast to be a dangerous major hurricane when it reaches the northeastern Gulf Coast on Wednesday,” said the National Hurricane Center. Tropical Storm Michael, with its center near the western tip of Cuba at 2 PM ET, is forecast to reach Category 3 status on Wednesday when it makes landfall on Florida’s Gulf Coast.

The Bureau of Safety and Environmental Enforcement reported approximately 19.07% of the current oil production and 11.09% of the natural gas production in the Gulf of Mexico has been shut-in ahead of the storm.

A “major incident” at Irving Oil’s 320,000 bpd St. John refinery in New Brunswick, Canada, was seen driving short covering in NYMEX RBOB futures, which settled up 0.76 cents at $2.0937 gallon, reversing off a $2.0484 two-week spot low.

Nobody was killed by the explosion and fire at the refinery, with several units shut ahead of the accident for turnaround. Irving shut the entire refinery, which was producing gasoline ahead of the incident. Irving Oil exports much of its yield from the refinery to the United States.

Gasoline stocks in the New England states are holding well above a year ago, with the Energy Information Administration showing the region’s inventory at 4.638 million bbl as of Sept. 28, up 1.152 million bbl or 33.1% against the comparable year-ago period.

NYMEX November ULSD futures reversed off a $2.3586 gallon one-week low to settle up a fractional 19 points at $2.3942 gallon.

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

(BAS)

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