Oil Futures Slip After Bearish API Stock Data, USD Gains

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange fell in pre-inventory trade Wednesday, with West Texas Intermediate November contract sliding below $75 per barrel (bbl) after preliminary data from the American Petroleum Institute showed across-the-board builds in U.S. crude and petroleum product supplies last week, while a stronger U.S. Dollar Index and concerns over a possible government default on $28.5 trillion in debt added further headwinds.

API late Tuesday afternoon reported nationwide crude oil and distillate stocks unexpectedly increased in the week ended Sept. 24, while also detailing a larger-than-expected build in gasoline inventories. API reported commercial crude oil supplies rose 4.127 million bbl in the week profiled, missing calls for a 2.5 million bbl draw. Data show stocks at the Cushing, Oklahoma, hub added 359,000 million bbl. Gasoline stockpiles rose 3.555 million bbl in the week ended Sept. 24, nearly four times estimates for a build of 900,000 bbl. API data show distillate inventories rose 2.483 million bbl compared with an expected 1.3 million bbl draw.

In early trading, NYMEX November WTI futures slid $0.55 to $74.74 bbl, come under additional pressure as the U.S. Dollar Index rallied to a fresh nearly 11-month high at 94 overnight. ICE November Brent retreated from Tuesday's $80.75 bbl 35-month high on the spot continuous chart to trade near $78.50, down about $0.60 ahead of expiration Thursday afternoon, with the December contract trading at a roughly $0.65 discount in the backwardated market. NYMEX October ULSD futures edged down 0.55 cents to near $2.2835 gallon ahead of expiration Thursday, with the November contract at a roughly 20-cent discount. October RBOB futures moved about 0.85 cents lower to $2.1885 gallon, with November delivery trading at a 4.95-cent discount in the seasonally backwardated market ahead of the October contract's expiration Thursday afternoon.

In financial markets, concerns surrounding a looming government shutdown later this week, as well as failure to raise the nation's $28.4 trillion debt ceiling, continue to limit the market's upside. Equities on Wall Street nosedived Tuesday after Treasury Secretary Janet Yellen told a U.S. Senate Banking Committee that lawmakers must raise the debt ceiling by Oct. 18 to avert the first default in U.S. history.

"The full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession," said Yellen.

U.S. Senate Republicans twice blocked bills by Democrats to raise the debt ceiling this week, with Senate Minority leader Mitch McConnell telling Democrats to use the reconciliation bill to lift the debt ceiling. Republicans have so far been united against raising the debt ceiling since being largely frozen out of discussions over a $3.5 trillion spending package Democrats are attempting to push through Congress without any Republican support.

Internationally, UK government said it would now deploy troops to help redistribute fuel into the nation's gas stations after unpreceded panic-buying over the weekend left almost 90% of them dry.

"We now are starting to see the situation improve. We are hearing from industry that supplies are coming back onto the forecourt in the normal way, and I would just really urge everybody to go about their business in the normal way," said UK Prime Minister Boris Johnson in televised remarks. Johnson's comments were his first since the fuel supply problems began at the end of last week when oil companies reported difficulty transporting petrol and diesel from refineries to filling stations.

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

Liubov Georges