CRANBURY, N.J. (DTN) -- December West Texas Intermediate on the New York Mercantile Exchange and December Brent crude on the Intercontinental Exchange dropped to six-week and five-week lows on their spot continuous charts, respectively, as Saudi Arabia, in the midst of a rapidly widening crisis over the death of Saudi dissident and journalist Jamal Khashoggi, sought to ensure the market they would pump enough oil to meet global oil demand as U.S. sanctions on Iranian oil exports take effect in less than two weeks.
The drop in crude values weighed on Nymex ULSD futures, which traded down to a one-month low despite below normal supply on the cusp of increased demand for heating oil as we move through the fourth quarter. Nymex RBOB futures traded at a fresh better-than seven-month spot low as gasoline stocks continue to hover at a near record high for this time of year.
The sell-off in oil futures is further spurred by tumbling equities Tuesday morning instigated by a slowing economy in China, with signs indicating the U.S.-China trade dispute is having an effect on the second largest world economy. A slowdown in China's growth is seen having a broader impact on the world economy and knock on effect in global oil demand.
Additionally, high oil prices in the third and early fourth quarters are seen to have adversely affected oil demand in pockets of the world, such as India. A stronger U.S. dollar, which reached a two-month high Tuesday, pushes the cost of oil by countries outside the United States even higher since oil trades globally in the U.S. currency.
On Monday in an interview with the TASS Russian News Agency, Saudi Arabian Energy Minister Khalid al-Falih said Saudi oil production increased from 10.5 million barrels per day (bpd) in September to 10.7 million bpd now, and could ramp up production to 12.0 million bpd.
In early trading, Nymex December WTI futures were down about $1.50 near $67.90 barrel (bbl) and near a six-week low of $67.59 bbl, with the market flipping into contango last week on growing commercial crude stocks, which reached a 3-1/2 month high on Oct. 12.
ICE December Brent futures were down $1.75 to just above $78.00 bbl, and near a $77.80 five-week spot low.
Nymex November ULSD futures were down 3.85 cents near $2.2795 gallon, and has traded at a $2.2725 gallon four-week spot low. Nymex November RBOB futures were down 3.75 cents near $1.8690 gallon, moving off a $1.8569 better-than seven-month spot low.
Dominick Chirichella, EMI DTN Director of Risk Management, Trading and Advisory Services, estimates U.S. crude stocks increased 2.6 million bbl during the week ended Oct. 19, with gasoline supply seen drawn down 2.0 million bbl and distillate stocks 1.5 million bbl lower.
The American Petroleum Institute will release weekly supply estimates at 4:30 p.m. ET, and the EIA their data set at 10:30 a.m. ET Wednesday.
NYMEX November ULSD futures settled up 1.61 cents at $2.3181 gallon, and NYMEX November RBOB futures pared a decline to a $1.8783 7-1/2 month low on the spot continuous chart with a $1.9067 gallon settlement, down 0.72 cents.
Brian L. Milne can be reached at firstname.lastname@example.org
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