Crude Futures Higher

CRANBURY, N.J. (DTN) -- The crude and distillate fuel futures contracts on the New York Mercantile Exchange and Intercontinental Exchange settled at four-session highs and the gasoline contract eased in a back-and-forth session following mixed weekly supply data and a weaker U.S. dollar, with equities gaining late afternoon.

NYMEX November West Texas Intermediate futures settled $0.57 higher at $53.93 barrel (bbl), up $0.57, as the November options contract expired this afternoon, with the December contract ending at a $0.10 premium. ICE December Brent crude futures settled near the session's high, just below $60 bbl at $59.91 for a $0.49 gain.

NYMEX November ULSD futures settled above the $1.9377 200-day moving average for a second session at $1.9481 gallon, up 0.55 cents. NYMEX November RBOB futures ended down 0.23 cents at $1.6225 gallon.

Despite the third largest weekly build in commercial crude oil supply in the United States in more than a year, WTI futures advanced partly on help from a weaker U.S. dollar, which slumped below the 97.582 100-day moving average to a 97.22 two-month low in index trading. The dollar weakness follows unexpected bearish U.S. retail and manufacturing data for September released over the past two sessions along with a rallying Euro that reached a nearly two-month high at 1.11545, testing resistance at the 1.11539 100-day moving average on news of a Brexit breakthrough.

British Prime Minister Boris Johnson and the European Union reached an agreement for a no delay exit from the EU on Oct. 31, with Reuters reporting all 27 leaders from the union approved the plan. The United Kingdom's Parliament must now ratify the agreement, which is not a certainty, with an extraordinary parliamentary session to take place Saturday, Oct. 19. Nonetheless, the EU's approval of Johnson's plan prompted a relief rally in the euro and boosted equities.

A larger than expected decline in U.S. industrial output in September reported this morning by the Federal Reserve followed by Wednesday's reported decline in U.S. retail sales, long seen as a pillar of strength for the U.S. economy, increases the likelihood the central bank will cut the federal funds rate at their next monetary policy meeting Oct. 29-30. In addition to pressuring the U.S. dollar, lower borrowing costs typically boost trading activity in oil futures.

The global economy will remain in focus Friday morning, with China to report third quarter gross domestic product and September industrial production results overnight. The market expects China's third quarter GDP to show 6.1% annualized growth, down 0.1%, and for industrial output to have snapped back from a seven-year low plumbed in August.

WTI futures gained despite the fifth consecutive weekly build in commercial crude inventory, which jumped a sharp 9.3 million bbl to a 434.9 million bbl eight-week high last week, 4.4% above year ago, data released this morning by the Energy Information Administration shows. A 1.3 million bbl draw from the Strategic Petroleum Reserve accounted for part of the buildup in commercial inventory, with a below normal domestic refinery run rate cutting crude demand by U.S. refiners more than usual during the current maintenance season.

The U.S. refinery run rate slid 2.6% to 83.1% last week, the lowest utilization rate in more than two years, with the previous low realized during the aftermath of Hurricane Harvey's crippling effect on the Houston-area refining center. Crude refiner inputs at 15.436 million barrels per day (bpd) during the week ended Oct. 11 were down 880,000 bpd or 5.4% against the comparable week a year ago.

EIA also reported a larger than expected drawdown in distillate fuel inventories for last week, which fell 3.8 million bbl to 123.5 million bbl, widening a deficit with the five-year average 1.8% to 11.3%.

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

(BAS)