Oil Futures at Pre-Saudi Attack Lows

WASHINGTON (DTN) -- Front-month oil futures contracts on the New York Mercantile Exchange and Brent on the Intercontinental Exchange slid 1% or more Wednesday amid concern over excess supply after government data showed a second consecutive weekly build in U.S. crude stocks and a record high domestic production rate. In other news, Saudi Arabia is ahead of schedule in restoring oil production shut-in by a devastating attack on its oil infrastructure on Sept. 14.

NYMEX November West Texas Intermediate futures shed $0.80 to settle at $56.49 barrel (bbl), the lowest settlement since Sept. 13, and the ICE November Brent contract dropped $0.71 to end the session at $62.39 bbl. NYMEX October ULSD futures fell 1.37 cents to settle at $1.9539 gallon and the October RBOB contract retreated 2.91 cents to $1.6252 gallon

Oil futures have erased gains following the price run-up triggered by the Sept. 14 attack.

Oil futures posted across-the-board losses Wednesday afternoon following data released by the Energy Information Administration that showed a 2.4 million bbl increase in U.S. crude supplies, while refining activity slowed amid seasonal maintenance. The crude build was especially bearish against earlier estimates of a 1.38 million bbl increase reported by the American Petroleum Institute.

Government data was less bearish for refined products though, showing gasoline supply increased less than expected and distillate stocks posted a larger-than-estimated drawdown. Implied demand for both gasoline and distillates moved higher during the week reviewed.

According to the data, U.S. crude production increased 100,000 barrels per day (bpd) last week to a record high 12.5 million bpd after stalling at 12.4 million for two weeks in early September. The higher production rate comes despite continued decline in the number of active drilling rigs in the United States.

Overnight reports indicate Saudi Aramco restored 11.3 million bpd of production capacity, with the mid-month attack having forced 5.7 million bpd of production to be shut-in. Reuters reported crude output from the Khurais field is now at 1.3 million bpd and the Abqaiq oil processing plant is currently at about 4.9 million bpd.

Saudi Energy Minister Prince Abdulaziz bin Salman previously indicated Saudi production capacity would reach 11 million bpd by the end of September and 12 million bpd in late November.

Recent developments in the U.S.-China trade war also sent mixed signals to the markets. U.S. President Donald Trump said Wednesday the United States may reach a trade deal with China "sooner than you think," sending stock indexes sharply higher on the session.

The latest comments came a day after the president lambasted China in a speech at the United Nations General Assembly however, with Trump accusing Beijing of currency manipulation and intellectual property theft. Nonetheless, U.S. and Chinese officials indicate trade talks are still on track to resume in Beijing in early October.

Liubov Georges can be reached at liubov.georges@dtn.com

(BAS)