CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest delivery and the Brent contract on the Intercontinental Exchange settled mixed Wednesday, although the divergence by oil products was extreme. Meanwhile West Texas Intermediate settled at a nearly eight-month low after slipping into bear market territory intraday for a second session.
Weekly oil statistics released midmorning Wednesday were the latest bearish development for oil futures, although supply data for distillate fuel was bullish -- showing inventory continued to decline, while demand outpaced year-ago during October.
The EIA report was bearish for gasoline, with an unexpected build and data showing implied demand slipped below the five-year average in late October, ostensibly on demand destruction amid high retail prices, pressed RBOB futures to the lowest settlement on the spot continuous chart in 11 months.
An eye popper in Wednesday's EIA report was a 400,000 barrels per day (bpd) surge in U.S. crude production to an 11.6 million bpd record high last week. The large increase comes on the heels of monthly data released Oct. 31 showing U.S. production was 300,000 bpd higher in August at 11.3 million bpd than initially reported in weekly data. The higher production was a key component in boosting commercial crude supply to its seventh consecutive weekly build, with stocks near a five-month high.
An unexpected 1.9 million barrels (bbl) build in gasoline stocks during the week-ended Nov. 2 was due partly to shrinking demand, with gasoline inventory at 228.0 million bbl 18.5 million bbl or 8.8% above year ago. Implied gasoline demand slumped below the five-year average to a 9.099 million bpd four-week low, while down 135,000 bpd or 1.4% during the four weeks ended Nov. 2 against the comparable year-ago period.
In contrast, distillate inventories were drawn down for a seventh straight week to a 15-week low at 122.9 million bbl. Implied distillates demand averaged 236,000 bpd or 6.1% above year ago during the four weeks ended Nov. 2, EIA data shows.
Demand for distillates is expected to increase as a cold front heads towards the U.S. Northeast. The National Oceanic Atmospheric Administration's Climate Prediction Center is forecasting below normal temperatures in the Northeast in its six to 10 day and eight to 14 day outlooks.
The domestic data cut short a modest recovery in early trading on reports Saudi Arabia and Russia are in talks to cut production in 2019 as global inventories build amid record high production from the Saudis, Russia and the United States timed to offset lost Iranian oil barrels amid U.S. sanctions that took effect on Monday. On Tuesday, EIA in their Short-term Energy Outlook said global inventories increased 2.0 million bpd in October, coinciding with seasonal downtime for refinery maintenance.
Reports suggest Russia is set to boost output higher absent a deal with the Saudis, while Iran is angrily calling for production cuts by the Organization of the Petroleum Exporting Countries. Iran's oil minister, Bijan Zangeneh, said certain members of OPEC are using a committee overseeing their 2016 production agreement as a political tool in supporting U.S. policy against the Islamic Republic.
These developments come ahead of the Joint Ministerial Monitoring Committee meeting on Nov. 11 in Abu Dhabi, when representatives from OPEC and 10 non-OPEC oil producers including Russia convene to discuss market conditions.
NYMEX December WTI futures settled down $0.54 at $61.67 bbl, the lowest settlement on the spot continuous chart since mid-March. ICE January Brent futures settled down a modest $0.06 at $72.07 bbl, with its premium to WTI widening to a better-than two week high at $10.40 bbl.
NYMEX December ULSD futures settled up 4.88 cents at a $2.2371 gallon one-week spot high. NYMEX December RBOB futures settled down 4.66 cents at $1.6474 gallon, the lowest settlement on the spot continuous chart since mid-December 2017.
Brian L. Milne can be reached at email@example.com
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