Oil Continue Lower on Stock Build

OAKHURST, N.J. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and spot month Brent crude futures on the Intercontinental Exchange eroded further Thursday, pressured by rising domestic supply, on continued strength in the dollar, a drop in equities on interest rate concerns and the ongoing U.S.-China trade dispute.

The stock market came under further selling pressure after U.S. Treasury Secretary Steven Mnuchin became the latest to back out of the investor conference in Saudi Arabia amid controversy over the disappearance and death of journalist Jamal Khashoggi.

With more than an hour left to trade, the Dow Jones Industrial Average was down 1.3% while the S&P 500 dropped 1.3% and the NASDAQ fell 1.8%.

On the supply side, the Energy Information Administration on Wednesday reported a 6.5 million bbl build in US commercial crude supplies as of Oct. 12. The build was the fourth in as many weeks with stocks up over 20.5 million bbl in the past three weeks alone. At 416.4 million bbl, crude stocks are at a 3-1/2 month high and the days of forward cover rose to a 4-1/2 month high.

Crude oil supplies at the Cushing, Oklahoma hub, which serves as the delivery location for the NYMEX West Texas Intermediate futures contract, rose for a fourth consecutive week. Up nearly 1.8 million bbl, supply at Cushing is at a better than two-month high.

EIA reported crude production backed off a record high at 11.2 million bpd to 10.9 million bpd due to Hurricane Michael related shut-ins. Still, production was nearly 29% above a year ago.

Meantime, differing reports regarding how much oil Iran is exporting ahead of looming U.S. sanctions as well as the who and how lost barrels will be covered remain an undercurrent in the market. The latest round of U.S. sanctions on Iranian oil are scheduled to take effect on Nov. 4.

According to International Energy Agency data for September, crude oil production by the Organization of Petroleum Exporting Countries hit a one-year high at 32.78 million bpd.

November WTI crude futures slid $1.10 to settle at $68.65 bbl, off a better than one-month low at $68.47 bbl while December NYMEX WTI shed just about $1 to $68.71 bbl settlement. December ICE Brent crude fell 76 cents to settle at $79.29 bbl.

NYMEX November RBOB futures moved off a more than seven-month low at $1.8803 gallon to settle at $1.8911 gallon. November ULSD futures settled 1.62 cents lower at $2.2949 gallon, having traded to a better than three-week low at $2.2836 gallon.

Dawn Gallagher can be reached at dawn.gallagher@dtn.com