WTI, Crude Oil Tumbles in Early Trade

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange "The market went from fears of shortages to fears of oversupply in just a few weeks and the truth is probably somewhere in the middle," said Phil Flynn, senior market analyst with the PRICE Futures Group.

Oil futures have largely shadowed equities which are down on global growth concerns exacerbated by the U.S.-China trade dispute. The Dow Jones Industrial Average is in correction territory, down 10.5% from an early October record high through Monday, while up in early trading.

Equities were hammered Monday, reversing early gains on reports the United States is set to announce another salvo of tariffs against China in early December if talks between U.S. President Donald Trump and Chinese President Xi Jinping don't yield progress in addressing U.S. complaints about China's trade policies.

The United States would slap tariffs on all the remaining U.S. imports from China that haven't already been subject to tariffs that equate to $257 billion, according to reports. The two leaders will meet at the G20 meeting in Argentina on Nov. 1 to Dec. 1.

U.S. third quarter gross domestic product was estimated at a more-than -- expected 3.5%, but down from a 4.2% growth rate in the second quarter. Tuesday morning, eurozone third quarter GDP slowed from 0.4% in the second quarter to a less-than-expected 0.2% annualized growth rate.

The concern over oil demand growth, which the International Energy Agency projects will reach a record high 100.2 million barrels per day (bpd) in the current fourth quarter, has pushed aside worry over supply availability as U.S. sanctions on Iranian oil exports take effect in just a few days.

Ramped up production from Saudi Arabia and Russia have also eased supply concerns during the current quarter, with global oil demand peaking during the fourth quarter while weakest during the first quarter. IEA projects world oil consumption would average 98.9 million bpd in the first quarter 2019.

A rallying U.S. dollar is also weighing on WTI futures, with the greenback jumping to a 2-1/2 month high in index trading Tuesday morning, with the previous high in August the strongest the currency has been since June 2017.

Nymex December WTI futures dropped to $65.33 barrel (bbl), the lowest trade on the spot continuous chart since mid-August, while down about $1.40 at $65.65 bbl in early trading. WTI futures flipped into a contango market this month on building commercial crude stocks and the expected early November startup of the Sunrise Pipeline that adds up to 500,000 bpd of takeaway capacity from Midland, Texas to Cushing, Oklahoma, the WTI futures delivery location.

ICE December Brent slumped to a $75.09 bbl 9-1/2 week low on the spot continuous chart ahead of the contract's expiration Wednesday afternoon, while down $1.75 to near $75.60 bbl. January delivery is trading about a dime higher than the expiring contract.

Nymex November ULSD futures were down 3.95 cents near $2.2450 gallon, with December delivery at near parity with the November contract which expires Wednesday afternoon. Nymex November RBOB futures were just above $1.80 gallon, down 2.25 cents ahead of its Wednesday expiration, with the December contract maintaining a 40-points discount to the expiring contract.

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

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