Oil Futures Fall Ahead of JMMC Meeting, US Inventory Data

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- New York Mercantile Exchange nearest delivery oil futures and Brent crude on the Intercontinental Exchange fell sharply early Thursday in concert with tumbling equities and a surging U.S. dollar, while oil traders await weekly inventory data for U.S. crude and petroleum product stocks while ministers with the Organization of the Petroleum Exporting Countries and Russia-led partners conduct a monthly meeting, reviewing compliance with their ongoing 7.7 million barrels per day (bpd) production cut agreement.

OPEC+ compliance with their output pact is estimated at 102% for September, improving from August's 98% compliance rate following a steep production decline by the United Arab Emirates last month, according to the cartel's latest Monthly Oil Market Report.

OPEC+ ministers will also review the latest developments in global demand recovery and increasing supplies out of Libya, where the United Nation's recognized government in Tripoli has reached a deal with the opposition leader General Khalifa Haftar, who had blockaded production there for eight months. International Energy Agency estimates crude oil production from Libya could rise to 700,000 bpd by the end of the year from its current rate of about 300,000 bpd. Libya is excluded from the OPEC+ production agreement.

OPEC Secretary General Mohammed Barkindo said Thursday the demand recovery following government lockdowns earlier this year still looks anemic, while renewed quarantine restrictions across major economies pose growing risk for oil demand.

Earlier this week, OPEC revised lower global demand estimates for 2020 to 90.3 million bpd on a 9.5 million bpd annualized drop, while 2021 demand projections adjusted lower by 80,000 bpd to 96.84 million bpd.

Late morning, U.S. Energy Information Administration will release its inventory report for the week ended Oct. 9, delayed a day by Columbus Day, which is expected to show across the board drawdowns.

American Petroleum Institute late Wednesday reported domestic crude oil supply fell 5.4 million barrels (bbl) last week as producers in the offshore Gulf of Mexico shut-in as much as 93% of crude output due to the Hurricane Delta, data from the Bureau of Safety and Environmental Protection shows. Refinery runs fell by 601,000 bpd during the week reviewed. Data also reported gasoline stockpiles fell 1.8 million bbl and distillate fuel inventories declined 2.9 million bbl on the week.

In early trading, November West Texas Intermediate futures dropped more than $1 to below $40 bbl and the December Brent contract shed $1 to trade near $42.20 bbl. NYMEX November ULSD futures declined nearly 3 cents to $1.1635 gallon and November RBOB futures fell 3.32 cents to near $1.1635 gallon.

A strengthening U.S. Dollar Index, which advanced 0.37% against a basket of six major global currencies to 93.710, further pressured front-month WTI futures.

Liubov Georges can be reached at Liubov.georges@dtn.co

Liubov Georges