Oil Futures Turn Mixed Ahead of OPEC+ Meeting, Stock Data

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange moved mixed in early trade Wednesday, with the October RBOB contract now the front-month on retreat after preliminary data from the American Petroleum Institute showed a surprise build occurred in nationwide gasoline inventories during the final full week of August as traders assess demand implications as the driving season nears an end while refinery shutdowns across Louisiana hindered by ongoing power outages could prompt product drawdowns, with reports of damage at the state's largest refinery.

Louisiana largest refinery, Marathon's 578,000 barrles per day (bpd) complex in Garyville, Louisiana, reported minor damages to its operational units and is running off generators as it conducts repairs, according to a company statement.

"Due to a power outage in the area, we are using generators to power aspects of our operations that enable us to progress with repairs and assessments, and we continue working on a timeline for resuming operations," said Marathon.

PBF's 190,000 bpd Chalmette facility and Shell's 230,000 bpd Norco facility were also confirmed without power amid ongoing repairs to critical transmission lines feeding greater New Orleans area and Baton Rouge. DTN previously reported that power outages will likely lead to widespread delays in restarting refinery units across affected areas. As such, prosects of weaker crude demand from Louisiana refineries will weigh on oil prices early September, exacerbated by the end of the summer driving season.

Limiting losses for crude futures, U.S. commercial crude oil inventories declined by a larger-than-expected 4.045 million barrels (bbl) in the week ended Aug. 27 compared with estimates for a 2.8 million bbl draw. Gasoline stockpiles posted a build of 2.711 million bbl versus expected 1.5 million bbl draw, while distillate inventories dropped 1.961 million bbl in the reviewed week compared with estimates for stocks to have remained unchanged.

DTN Refined Fuels Demand data showed gains in diesel demand far outpaced those for gasoline, with distillate use surging nationally by 2.6% compared with a 0.4% increase for gasoline. Diesel demand was up 3.6% relative to the same week in 2019 last week, strengthening compared to seasonal norms after being up just 1% compared to 2019 levels in the prior week.

Separately, Organization of the Petroleum Exporting Countries and Russia-led partners, a group known at OPEC+, are set to stick to their current output agreement when they meet virtually Wednesday. Previously, OPEC+ agreed to raise collective output by 400,000 bpd each month until December 2022.

OPEC+ Joint Technical Committee revised higher their demand forecast for both this year and next year, and now estimate global oil demand to grow by 4.2 million bpd in 2022, nearly 1 million bpd higher than previously projected.

Earlier this week, JTC noted that the global oil market would remain in a 900,000-bpd deficit this year but reach a surplus of 2.5 million bpd in 2022 as the group gradually raises production. Private survey showed oil production from the 13-member cartel increased by 210,000 bpd this month to 26.36 million bpd -- the highest output rate since April 2020. Production gains were driven by Saudi Arabia and Iraq, while output in Nigeria, Libya and Iran posted monthly declines.

On economic data front, Eurozone manufacturing sector cooled slightly in the final weeks of August amid reported capacity constraints and ongoing shortages of labor. The headline IHS Markit final manufacturing Purchasing Managers Index fell to 61.4 in August from July's 62.8, slightly below an initial 61.5 "flash" estimate.

"Euro zone manufacturers reported another month of buoyant production in August, continuing the growth spurt into its 14th successive month," said Chris Williamson, chief business economist at IHS Markit. "The overriding issue was again a lack of components, however, with suppliers either unable to produce enough parts or facing a lack of shipping capacity to meet logistics demand."

Investors will next shift their focus to domestic manufacturing data for August released by the Institute of Supply Management, with consensus calling for activity across industrial sector to have declined 0.5% from the previous month to 59.

Near 7:30 a.m. ET, NYMEX October West Texas Intermediate futures gained $0.20 to trade at $68.70 bbl, with Brent crude for November delivery advancing $0.24 to near $71.86 bbl. NYMEX October RBOB futures declined 0.61 cents to $2.1353 gallon, and front-month ULSD futures traded little changed near $2.1343 gallon.

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

Liubov Georges