Oil Futures Slip in Morning Trade

WASHINGTON (DTN) -- Oil futures on New York Mercantile Exchange and Brent crude on the Intercontinental Exchange eased in overnight trade after industry data showed U.S. crude stocks surged more than 10 million bbl last week and gasoline supply declined less-than-expected, spurring concern over lost fuel demand on the back of weakening economic growth.

Around 8:30 a.m. ET, West Texas Intermediate November futures were down $0.31 near $53.05 per barrel (bbl), with November WTI options set to expire Thursday afternoon. The December Brent contract slipped $0.33 to trade at $59.09 bbl. November ULSD futures fell 1.36 cents to $1.9294 gallon and the November RBOB contract dropped 2.38 cents near $1.6010 gallon.

American Petroleum Institute reported Wednesday a supersized 10.5 million bbl build in domestic crude supply during the week ended Oct. 11, sending oil complex lower. The large build was particularly bearish against expectations for a 1.9 million bbl increase, while gasoline supply declined a modest 934,000 bbl versus a market call for a 1.8 million bbl draw. Industry data also showed distillate stocks declined 2.9 million bbl, slightly better than expectations for a 2.6 million bbl decline on the week.

Thursday morning, investors await official supply data from the U.S. Energy Information Administration set for release 11 a.m. ET. Markets will likely selloff if the large build is confirmed, reinforcing sentiment that slowing economic growth is weighing on oil demand.

Adding to the bearishness, Federal Reserve downgraded U.S. economic growth from "modest" to "slight to modest pace" in September amid "persistent trade tensions and deteriorating consumer and manufacturing activity."

U.S. consumer spending also unexpectedly fell 0.3% last month in contrast to market calls for 0.3% increase. For the Federal Reserve, the slowdown in consumer spending could strengthen the argument of doves pushing for more rate cuts.

In U.S.-China trade news, Beijing reiterated Thursday the United States must lift all tariffs to end the trade war -- a move objected by the Trump administration. Still, Chinese negotiation teams are working on "phase one" of a deal agreed to last week in Washington ahead of a meeting between U.S. President Donald Trump and Chinese President Xi Jinping next month at the Asia-Pacific Economic Cooperation Summit in Chile, where the leaders of the world's two largest economies are expected to sign the agreement. U.S. Treasury Secretary Steven Mnuchin said Wednesday that he and U.S. Trade Representative Robert Lighthizer would likely meet Chinese Vice-Premier Liu He in the capital of Santiago before the presidential summit.

In the Middle East, the United States has reportedly carried out a cyberattack on Iran in the wake of the Sept. 14 attack on Saudi oil infrastructure; a claim denied by Tehran. Still, oil futures gained nearly 1% Wednesday on the risk of escalating tensions in the volatile region.

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

(BAS)