WTI Pares Gains on Growth Outlook

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

WASHINGTON (DTN) -- Except for the front-month RBOB contract, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Tuesday's session modestly higher. However, all contacts retreated from intrasession highs after the International Monetary Fund cut its Asia growth outlook for the second time this year, citing supply chain issues and growing tally in new COVID-19 infections, while market participants await the release of weekly inventory data domestically for additional clues on the market's supply-demand disposition.

U.S. commercial crude oil inventories likely increased by 700,000 barrels (bbl) during the week-ended Oct. 15 after spiking more than 6 million bbl in the previous week, according to estimates from a number of analysts and traders. Gasoline stockpiles are expected to fall by 1.1 million bbl from the previous week, although estimates range from a decrease of 2.2 million bbl to an increase of 2 million bbl. Stocks of distillates, which include heating oil and diesel, are expected to fall 900,000 bbl from the previous week. Refinery run rates likely fell by 0.2% from the previous week to 86.5% of capacity. The American Petroleum Institute will release its closely watched survey at 4:30 p.m. ET, followed by official inventory data from the U.S. Energy Information Administration on Wednesday.

At settlement, NYMEX West Texas Intermediate futures for November delivery climbed $0.52 to $82.96 bbl after trading as high as $83.74 bbl mid-session, and next-month delivery December WTI contract narrowed its discount to $0.58 bbl. The November WTI contract expires Wednesday afternoon. December ICE Brent futures settled the session above $85 bbl, gaining $0.75 since Monday's close. November RBOB futures on NYMEX fell 1.11cts to $2.4755 gallon, and front-month ULSD futures advanced 1.15cts to $2.5607 gallon.

On Tuesday, the IMF once again downgraded its 2021 growth forecast for the Asia-Pacific region, citing a fresh surge in Delta-driven infections and lagging vaccinations. The Washington based fund now expects the region to grow 6.5% this year -- down 1.1 percentage points from its April outlook, yet still the world's fastest growing area. The regional economy is expected to expand 4.9% in 2022, 0.4% higher than the previous forecast. IMF's growth downgrade follows a disappointing print on gross domestic product in China, the region's largest economy, where third quarter growth rate badly missed expectations with 4.9% compared with the previous quarter's 7.9%. The slower-than-expected GDP growth reflects a range of factors, including fading effects of the stimulus enacted in the immediate aftermath of the pandemic last year, a crackdown on private sector, and energy crisis caused in part by soaring coal prices and more aggressive energy targets, as well as disruptions to the supply chain caused by COVID-19 outbreaks.

Domestically, industrial output in September unexpectedly fell 1.3% compared with calls for a modest growth of 0.2%, with Hurricane Ida-caused disruptions along the Louisiana Coast responsible for 0.6% of the September decline. Ongoing shortages of semiconductors led to a 7.2% plunge in the production of motor vehicles and parts and caused more than half of the drop off in factory output last month.

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

Brian Milne