Oil Futures Slide After Russia Pledges EU Gas Deliveries

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange extended losses in early trade Thursday after Russian and U.S. officials pledged to ease fuel shortages in energy-starved European Union where depleted inventories and low output from renewable sources sent natural gas prices to record-highs this week, while unexpected builds in domestic crude and petroleum products supplies further weighed on the oil complex.

Russian President Vladimir Putin said Moscow stands ready to boost gas supplies to the European Union in coming weeks, signaling the energy crunch that gripped the world's largest collective economy could soon be mitigated. Putin reiterated that Moscow is a reliable supplier, adding that "We can reach another record of deliveries of our energy to Europe, including gas."

Dutch Title Transfer Facility gas futures fell more than 50 euros after Putin's comments to trade 9.5% lower on the day at 105 euros megawatt-hour. Even after the retreat, European gas prices remained more than twice as high as they were a month ago and had risen more than 150% last month.

Elsewhere, the U.S. Energy Secretary Jennifer Granholm said Wednesday that the U.S. has several tools to rein in energy prices, including a potential release of oil from strategic petroleum reserves and an export ban, although analysts believed the latter was unrealistic as it would create havoc for domestic shale oil industry.

Oil complex came under further pressure after U.S. Energy Information Administration reported on Wednesday domestic crude oil supplies increased for the second consecutive week through Oct. 1 despite a sharp increase in refinery run rates. U.S. commercial oil inventories gained for the second consecutive though the reviewed period, building by 2.3 million barrels (bbl) compared with expectations for stocks to have remained unchanged. Unexpected build was realized even as domestic refiners hiked run rates by 1.5% from the previous week to 89.6% -- the highest utilization rate since the final week of August when Hurricane Ida shuttered a large chunk of Louisiana refinery capacity. U.S. refiners processed 329,000 barrels per day (bpd) of additional crude during the week ended Oct. 1 for a daily rate of 15.744 million bbl. Gasoline inventories posted an unexpected build of 3.3 million bbl versus calls for stocks to have declined by 200,000 bbl, while demand for motor gasoline remained little changed near 9.427 million bpd. Distillate inventories, meanwhile, fell by 396,000 bbl from the previous week to 129.3 million bbl, and are now about 11% below the five-year average, EIA data shows.

Distillate consumption, often seen as proxy for economic activity, jumped 392,000 bpd in the reviewed week to 4.365 million bpd -- directionally in line with a 2% increase reported by DTN Refined Fuels Demand data.

Near 9:00 a.m. ET, NYMEX November West Texas Intermediate futures fell $0.76 to trade near $76.72 bbl, and ICE December Brent contract declined $0.49 to below $81 bbl. NYMEX November ULSD futures dropped more than 1.50 cents to $2.4272 gallon, and front-month RBOB futures retreated 0.58 cents to $2.3024 gallon.

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

Liubov Georges