Oil Rallies Ahead of Supply Reports

WASHINGTON (DTN) -- Crude and product futures on the New York Mercantile Exchange and Intercontinental Exchange moved higher in market-on-close trade Tuesday. West Texas Intermediate November futures rallied 1.6% ahead of contract expiration, gaining on reports the Organization of the Petroleum Exporting Countries and Russia will consider deeper production cuts when they meet in December.

Tuesday afternoon, traders also positioned in front of a fresh set of estimates on last week's change in U.S. crude and petroleum stocks. The market call is for domestic crude stocks to have increased 4.7 million barrels (bbl) during the week ended Oct. 18, extending a building pattern started in early September. For gasoline inventories, analysts expect a 2 million bbl draw to have occurred last week and distillate stocks to have declined by 3 million bbl, as domestic refiners continue to undergo seasonal maintenance.

American Petroleum Institute will release its figures 4:30 p.m. EDT, while U.S. Energy Information Administration is set to publish official statistics 10:30 a.m. EDT Wednesday.

NYMEX December West Texas Intermediate futures advanced $0.97 per bbl to settle at $54.48 per bbl, while November WTI rolled off the board with a $0.85 gain. ICE December Brent crude futures ended the session up $0.74 per bbl at $59.70 per bbl.

Following back-and-forth sideways trade, product futures ended the session marginally higher. NYMEX November ULSD futures were up 0.31 cent to settle at $1.9437 gallon, and NYMEX November RBOB futures added 0.17 cent to $1.6089.

Tuesday's session sent crude contracts sharply higher amid renewed chatter that OPEC and allies will consider further supply cuts for next year to arrest the buildup in global stocks, as global demand growth is seen faltering.

Reuters reported Saudi Arabia objective is to first boost compliance with the OPEC+'s existing quotas before committing to deeper cuts in 2020. OPEC members Iraq and Nigeria are among the countries that have consistently failed to comply properly with pledged output reductions. Nigeria struggled to comply with its target, as the country plans to expand its oil industry and Iraq has been gripped with antigovernment protests for months.

Russia also missed its pledged target last month, reigniting concerns over rising supplies -- with Russia, Saudi Arabia and the United States the world's three largest oil producers.

Due to seasonal adjustment to winter, Moscow usually increases output of gas condensate in the fall months which comes along with higher volumes of crude oil, suggesting the country is unlikely to meet its OPEC target through the end of the year.

Adding to oversupply concerns, Kuwait and Saudi Arabia have reportedly began talks on resuming oil production from jointly operated fields in the 500,000 barrel-per-day Neutral Zone. The two countries halted output from the Khafji and Wafra oilfields more than three years ago, cutting nearly 0.5% of global oil supply.

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

(BAS)