Oil Futures Trim Losses on OPEC+ Deal, Large Crude Draw

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Wednesday's session mostly lower, although all contracts moved off intrasession lows after the Organization of the Petroleum Exporting Countries in consortium with Russia-led partners reaffirmed their agreement to gradually increase oil production until the end of the year, bringing back 400,000 barrels per day (bpd) of shut-in output next month, while a larger-than-expected draw from U.S. commercial crude oil inventories lent support for the West Texas Intermediate contract.

Wednesday's meeting among OPEC+ ministers delivered no surprises to the market, leaving previously agreed to adjustments of 400,000 bpd a month until phasing out the remainder of 5.4 million bpd in production cuts unchanged. There was speculation the group would consider boosting joint production by more than expected after Russia's energy minister Alexander Novak suggested the second largest producer within the coalition could increase output well above OPEC+ limits.

"Global oil demand is seen growing between 5.8 million and 6 million bpd this year," Novak told reporters following the conclusion of the meeting, adding he expects the oil market fully restored next year.

"Joint actions allowed to take away [oil] excess accumulated when demand was down - think we have fulfilled this task. Now it is important to maintain this balance and synchronize production and demand as the market rebounds," Novak, also Russia's deputy prime minister, said.

The technical panel for OPEC+ found the global oil market would remain in a 900,000-bpd deficit for the remainder of the year before flipping to surplus in 2022.

Wednesday's inventory report from the U.S. Energy Information Administration was mostly supportive for crude and distillate fuels but bearish for the gasoline complex.

Data showed gasoline stocks unexpectedly increased 1.3 million barrels (bbl) from the previous week to 227.2 million bbl compared with calls for a 1.5 million bbl draw. Gasoline supplied to the U.S. market remained little changed near 9.578 million bpd.

Demand for distillate fuels, meanwhile, strengthened 7% from the previous week to 4.39 million bpd. DTN Refined Fuels Demand data showed diesel consumption was up 3.6% last week relative to the same week in 2019, strengthening compared to seasonal norms after being up just 1% compared to 2019 levels in the prior week.

U.S. commercial crude oil inventories plunged a larger-than-expected 7.2 million bbl in the final full week of August despite domestic production gaining to 11.5 million bpd last week and refiners scaling back on crude throughputs.

Market participants continue to monitor efforts to bring shuttered refineries in Louisiana into service, with the latest data released by the Department of Energy showing seven refineries in Louisiana remain shut that account for about 1.7 million bpd of refinery capacity or approximately 9% of the total U.S. operable refinery capacity. The region's largest refinery, Marathon's 578,000 bpd complex in Garyville, reported minor damage to its operational units and said it is running off generators as it conducts repairs, according to a company statement.

The Department of Energy reports two refineries in the "Baton Rouge area initiated the restart process as of Aug. 31, although they will not be producing at full rates for several days. Damage assessments are underway at some refineries, but operations cannot restart until feedstock supply, power, and other essential third-party utilities are restored."

Upstream, the Bureau of Safety and Environmental Enforcement on Wednesday afternoon said operator reports estimate approximately 79.96% or 1,455,279 bpd of current oil production in the Gulf of Mexico remains offline following Hurricane Ida, down from 93.69% the day prior. Based on data from offshore operator reports, personnel remain evacuated from a total of 249 production platforms, 44.46% of the 560 manned platforms in the Gulf of Mexico, down 29 from day prior.

On the session, NYMEX October WTI futures settled little changed at $68.59 bbl after trading as low as $67.12 bbl, and Brent crude for November delivery settled down $0.04 at $71.59 bbl. NYMEX October RBOB futures declined 3.10 cents to $2.1109 gallon and front-month ULSD futures softened to $2.1289 gallon.

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

Liubov Georges