WASHINGTON (DTN) -- With the U.S. dollar rapidly strengthening and equity futures in retreat, crude and refined products futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange fell in early trade Wednesday after preliminary data from the American Petroleum Institute showed across-the-board builds occurred in U.S. crude and petroleum inventories last week, while Saudi Arabia's decision to cut nearly all of its November crude prices for Asia, European and U.S.-bound cargoes have further weighed on the market.
Saudi national oil company, Aramco, trimmed its official selling price for the flagship Arab Light crude bound for Asia to $1.30 per barrel (bbl), down 0.40 cents from October. Aramco also cut prices for crude bound to Northwest Europe and the United States after keeping them unchanged in October. Extra light to North West Europe was down $1 bbl to a negative $1.80 bbl against Oman/Dubai average. U.S. buyers received a modest discount of 0.10 cents per bbl from October's $2.40 bbl.
The price moves might give global refiners an incentive to increase crude liftings in November as OPEC+ gradually raises its production targets, which might suggest the physical oil market is not as tight as some analysts have thought. On Monday, OPEC and Russia-led partners agreed to increase crude production by 400,000 barrels per day (bpd) in November, sticking to their plans to keep easing their cuts in measured steps.
Separately, API data released Tuesday afternoon show U.S. commercial crude oil supplies rose 951,000 bbl in the week-ended Oct. 1, missing calls for stocks to remain unchanged. Data show stocks at the Cushing, Oklahoma, hub increased 1.999 million bbl.
Gasoline stockpiles posted a build of 3.682 million bbl in the week ended Oct. 1, missing estimates for a 200,000 bbl decrease. API data show distillate inventories added 345,000 bbl compared with an expected 1.1 million bbl draw.
U.S. diesel demand, often seen as a proxy for economic activity, increased 2% in the week ended Oct. 1, according to DTN's Refined Fuels Demand data, while gaining 5.9% relative to the same week in 2019. On a seven-day moving average basis, U.S. diesel demand is now 6.3% higher than the same seasonal period in 2019.
The case for strong diesel demand in the fourth quarter is also supported by better-than-expected U.S. economic data, showing U.S. business activity in manufacturing and services industries grew in September despite shortages of labor and raw materials. Demand remains strong in an economy that is otherwise slowing. The closely watched Atlanta Federal Reserve GDPNow forecast slashed its third-quarter economic growth projections from 6.3% since Aug. 3 to 1.3% on Tuesday.
"Constrained supply of many key product groups and inflationary pressures in most areas of the business keep driving costs higher. Inconsistent COVID-19 restrictions throughout the country are creating unstable business conditions that are concerning. However, business continues to be strong overall," commented a business in wholesale trade earlier this week.
In early trading, NYMEX November West Texas Intermediate futures slid from a $78.53 bbl seven-year high settlement to trade near $77.80 bbl, and ICE December Brent contract declined more than $1 to $81.50 bbl. NYMEX November ULSD futures fell more than 2 cents to $2.4710 gallon, and front-month RBOB futures declined about 2.5 cents to $2.3336 gallon.
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