CRANBURY, N.J. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and the Intercontinental Exchange Brent contract registered gains in closing out another volatile week. Trade was dominated by building commercial crude inventory, questions regarding global oil demand growth and the possibility Saudi Arabia's Crown Prince might be complicit in the murder of a Saudi dissident.
On the week, oil futures eased while West Texas Intermediate dropped more than $2 bbl on quickly building stocks ahead of Monday's expiration of the November contract, with WTI moving out of backwardation. The rapidly improving domestic disposition of crude supply triggered sharp selling at midweek, joining talk that the United States might grant more waivers from U.S. sanctions on Iranian oil exports set to take effect Nov. 4 than previously thought, as the U.S.-Saudi alliance frays under the suspicious disappearance on Jamal Khashoggi. Global spare capacity is limited, estimated at about 2% of world oil demand, with the majority of the buffer supply located in Saudi Arabia.
The U.S. administration said it will await the findings of an investigation into Khashoggi's disappearance, while the Turkish government said the Washington Post reporter and critic of Crown Prince Mohammad bin Salman was murdered and dismembered in the Saudi Consulate in Istanbul. U.S. President Donald Trump said there would be serious consequences for Saudi Arabia if the ruling family is implicated in his murder.
Oil futures were also under pressure this week as global oil demand expectations are cut on concern over slowing world economic growth, with China overnight reporting a greater-than-expected slowdown in third quarter gross domestic product that at 6.5% was the slowest annualized growth rate since 2009.
While the International Energy Agency continues to forecast record high demand for the current fourth quarter at about 100 million bpd, the consumption rate is projected to slow during the first quarter 2019. Additionally, a strengthening U.S. dollar is making oil more costly for customers outside the United States since oil trades globally in dollar denominations.
The Energy Information Administration reported a 6.5 million bbl increase in U.S. commercial crude inventory for the week ended Oct. 12. This, combined with the previous two weeks, built stocks by 20.5 million bbl. Days of forward crude supply jumped to 25.4, a 3-1/2 month high, while on Sept. 8 they were at a 22.3 days three-year, seven-month low.
Gasoline days of forward supply continue to expand quickly too, at 25.8 days on Oct. 12, a six-month high, and 1.7 days above the 5-year average. Gasoline stocks are hovering near record highs for this time of year.
NYMEX November WTI futures settled up $0.47 at $69.12 bbl after trading at a $68.47 five-week spot low Thursday, with the December contract settling at a $0.16 premium to the expiring contract. On the week, November WTI futures erased $2.22 or 3.1% of its value.
ICE December Brent crude settled up $0.49 at $79.78 bbl while down $0.65 from prior Friday. Brent's premium to WTI reached a 4-1/2 month high at $10.66 bbl at settlement, highlighting growing U.S. oil supply.
NYMEX November ULSD futures settled up 0.71cts at $2.3020 gallon while down 1.93cts this week. NYMEX November RBOB futures settled with a 2.28cts gain at $1.9139 gallon, while down 2.81cts since prior Friday.
Brian L. Milne can be reached at firstname.lastname@example.org
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