Oil Ends Mixed After Midday Gains

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange nearest delivered oil futures ended mixed and the December Brent contract on the Intercontinental Exchange settled at a fresh two-month spot low amid easing supply concerns and data showing slowing economic growth, while equities were again in the loss column.

NYMEX oil futures were boosted by weekly supply data released midmorning Wednesday from the Energy Information Administration showing larger-than-expected drawdowns in gasoline and distillate inventories during the week-ended Oct. 19. Another large build in crude supply, up 6.3 million bbl to a four-month high, was bearish, although 1.2 million bbl of that supply was from the Strategic Petroleum Reserve.

Implied demand for oil products surged during the week profiled, up 1.531 million bpd to a 21.491 million bpd seven-week high. Cumulatively in 2018 through Oct. 19, implied demand for oil products is up 529,000 bpd or 2.6% compared with the year-ago pace.

The bullish products data and expectations lower oil prices would incite greater demand was countered by bearish economic data out of Europe, while in the United States the Federal Reserve's Beige Book showed a more cautious outlook.

The eurozone PMI composite flash index for October dropped from 54.2 to 52.7, and was below consensus for a more modest decline to 53.9. Manufacturing declined from 53.3 to 52.1 and below expectations for a 53.0 reading, and service fell from 54.7 to 53.3 with projections anticipating a reading of 54.6.

"Economic activity expanded across the United States, with the majority of Federal Reserve Districts reporting modest to moderate growth," read the Beige Book released Wednesday afternoon, and warned about trade uncertainties, rising materials and shipping costs, and difficulties in finding qualified workers.

The regional outlook comes ahead of Friday's advanced reading of U.S. gross domestic product for the third quarter by the Bureau of Economic Analysis, with the market expecting year-on-year growth of 3.3%, down from annualized growth of 4.2% for the second quarter.

The Dow Jones Industrial Average was down more than 600 points in late trading.

In addition to the broader market's weakness, sentiment for oil futures is bearish and oil futures are in short-term downtrends.

Saudi Arabia's announcement that it is producing 10.7 million bpd now, up 200,000 bpd from September, on its way to 11.0 million bpd while adding it could ramp up production to 12.0 million bpd in three months has pushed worry over lost Iranian oil supply due to U.S. sanctions to the backburner. The United States has told companies they need to end their purchases of Iranian oil by Nov. 4 or face sanctions.

The Saudis out-of-character guidance and willingness to pump all out follows the death of Saudi dissident Jamal Khashoggi at the Saudi Consulate in Istanbul, Turkey, that has drawn international condemnation. Khashoggi, a Washington Post journalist, was a critic of Crown Prince Mohammed bin Salman. During an investment conference in Riyadh Wednesday, the crown prince said the killing of Khashoggi was a "heinous crime that cannot be justified."

NYMEX December West Texas Intermediate settled up $0.39 at $66.82 bbl, with the ICE December Brent contract ending the session down $0.27 at $76.17 bbl, a fresh two-month low on the spot continuation chart. NYMEX November ULSD futures reversed off a $2.2305 one-month spot low to settle with a modest 0.37-cent gain at $2.2521 gallon. NYMEX November RBOB futures settled down 1.45 cents at an eight-month spot low at $1.8223 gallon.

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

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