Oil Futures Down on Crude Build

WASHINGTON (DTN) -- Crude and product futures on the New York Mercantile Exchange and Intercontinental Exchange retreated to one-week low settlements on Wednesday. Declines were accelerated following reports of a possible delay for a U.S.-China trade agreement, while a larger-than-expected crude build in U.S. inventories last week added to the selling pressure.

NYMEX December West Texas Intermediate futures dropped $0.48 to a $55.06-per-barrel (bbl) settlement and ICE December Brent futures ended down $0.98 at $60.61 per bbl, with both benchmarks shedding all their gains from late last week.

The diesel contract posted greater losses on the session ahead of Thursday's expiration of the NYMEX November RBOB and ULSD nearest contracts. NYMEX November ULSD futures plunged 4.27 cents to a $1.9136-per-gallon settlement, with next month delivery December futures ending at a 1.4 cent discount.

November RBOB contract tumbled 2.12 cents to $1.6645 per gallon and December futures widened its discount to 4.67 cents on the session. Brent and NYMEX oil products futures remain in backwardation.

Crude contracts extended lower for a third session on Wednesday after Chilean government cancelled an Asia-Pacific Economic Forum where presidents Donald Trump and Xi Jinping were expected to sign "phase one" of a long-awaited trade agreement. However, a spokesman for the White House said in a statement Wednesday that the event's cancellation would have no impact on the timeline of signing the document, while offering no further details on the venue or date for finalizing the deal.

The Federal Open Market Committee approved on Wednesday an expected 25-basis-point reduction in the federal funds rate to a new target range of 1.5% to 1.75% but indicated that future cuts to interest rates might be on pause as long as conditions do not deteriorate further. The Fed's announcement came hours after third-quarter U.S. GDP was reported at 1.9% -- slightly above market expectations, but still below the 2% growth rate from April-July.

Lower settlements also follow the release of weekly inventory data on U.S. crude and petroleum stocks. Energy Information Administration reported midmorning U.S. commercial crude oil inventories increased by a larger-than-expected 5.7 million bbl last week, surpassing market expectations by nearly five times, while lifting total stocks 1% above the five-year average. U.S. production remained unchanged at a record-high rate of 12.6 million barrels per day (bpd) for nearly all of October, despite the continued decline in the number of active oil rigs.

EIA also reported total gasoline inventories dropped 3 million bbl to 220.1 million bbl, the lowest level since the first week of December 2017 and 2.7% below this time last year. Stocks are, however, about 2% above the five-year average. Distillate fuel inventories dropped for a fourth consecutive week, down 1 million bbl to 119.8 million bbl, the lowest level since the week ended Dec. 21, 2018, when supply was 119.902 million bbl. Stocks are currently 5.1% lower than the corresponding week in 2018 and about 11% below the five-year average for this time of year.

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

(BAS)