Oil Slides in Morning Trade

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and the Brent contract on the Intercontinental Exchange moved lower early Wednesday following Tuesday's price advance, and ahead of the release of federal supply data midmorning and the afternoon expiration of November West Texas Intermediate options.

Oil futures are down as the market contemplates slowing world economic growth compared with previous forecasts, with the International Monetary Fund last week dialing down their projected expansion of the global economy by 0.2% to 3.7% for this year and in 2019. Higher oil prices was one of the factors cited by the International Monetary Fund for revising their economic outlook lower from their forecast in April.

A slowing expansion in the world economy would reduce the growth rate in global oil demand. The outlook is uneven however, with high debt loads and a stronger U.S. dollar having an outsized impact on several emerging economies where global oil demand growth was seen more robust than in more mature economies.

The U.S. dollar rallied off a 2-1/2 week low in index trading ahead of the afternoon release of the minutes to the September meeting of the Federal Open Market Committee when Fed officials lifted the federal funds rate 25 basis points to 2.0% to 2.25%. Central bank officials also highlighted robust and enduring U.S. economic growth and expectations for inflation to remain low through 2020. The rate hike has fanned concern in sustaining that growth.

While revising their global oil demand growth outlook lower last week, the International Energy Agency still expects record high demand during the current fourth quarter at about 100 million barrels per day (bpd).

The Energy Information Administration will publish oil supply data for the week-ended Oct. 12 at 10:30 a.m. ET, with a report from the American Petroleum Institute trade group late Tuesday showing crude supplies dropped 2.13 million barrels (bbl) during the week that compared with market expectations for a 1.5 million bbl build. The draw followed production shut-ins at offshore platforms in the Gulf of Mexico because of Hurricane Michael, and a 14.0 million bbl increase in supply during the two preceding weeks.

API also reported a 3.42 million bbl draw in gasoline stocks during the week profiled that was well above expectations that gasoline supply declined by 400,000 bpd. Distillate supply declined by 200,000 bbl that was less than an estimated 1.2 million bbl draw.

Shortly after 10 a.m. ET, Nymex November WTI futures were down more than $1.00 near $70.75 bbl, with the contract set to expire at the Oct. 22 close of trade. December WTI futures were down a similar amount near $70.65, with November's premium shrinking in the backwardated market.

ICE December Brent is down about $1.00 near $80.34 bbl.

Nymex November ULSD futures were down 2.25 cents near $2.3175 gallon, with November RBOB futures 2.25 cents lower near $1.9550 gallon.

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


Brian Milne