WASHINGTON (DTN) -- Nearby-delivery-month oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange rallied in market-on-close trade Wednesday, with the front-month West Texas Intermediate expiring at a fresh seven-year high on the spot continuation chart.
Weekly federal inventory data Wednesday detailed an unexpected decline in U.S. crude supplies and larger-than-expected draws in petroleum product supplies during the week ended Oct. 15 with demand for motor gasoline and distillate fuels strengthening amid falling domestic production.
NYMEX West Texas Intermediate futures for November delivery expired at $83.87 per barrel (bbl), surging $0.91 on session, and next-month delivery December WTI sharply narrowed its discount to $0.45 per bbl for a $83.42-per-bbl settlement. The December ICE Brent futures gained $0.74 to settle at $85.82 per bbl. November RBOB futures on NYMEX surged 3.29 cents to a $2.5084-per-gallon settlement, and front-month ULSD futures rose 3.16 cents to settle at $2.5923 per gallon.
Wednesday's inventory report from the U.S. Energy Information Administration was bullish for the oil complex across the board, showing total commercial crude and petroleum product supplies declined by a massive 9.7 million bbl in the week ended Oct. 15. Gasoline consumption spiked above 9.6 million barrels per day (bpd), and domestic production unexpectedly declined 100,000 bpd to 11.3 million bpd. Domestic refiners, meanwhile, continued to reduce run rates, which fell by 2 percentage points to 84.7%, suggesting continued rollout of seasonal maintenance programs. As a result, domestic gasoline stockpiles dropped by a larger-than-expected 5.4 million bbl last week, compared with analysts' expectations for inventories to decrease by 1.1 million bbl. Distillate inventories, which includes heating oil and distillate fuels, fell by 3.9 million bbl to 125.4 million bbl and are now about 10% below the five-year average. Analysts were forecasting a much smaller 900,000-bbl decline.
Earlier in a session, oil futures came under selling pressure from a myriad of downward revisions to the global economic growth, including the International Monetary Fund's 1.1% cut to Asia's growth that followed a disappointing print on China's gross domestic product for the third quarter. In its latest Beige Book released Wednesday afternoon, the U.S. Federal Reserve said domestic growth slowed this fall under pressure from supply chain disruptions and shortages of labor. "Outlooks for near-term economic activity remained positive, overall, but some Districts noted increased uncertainty and more cautious optimism than in previous months," according to the summary of information from the Fed's 12 regional districts, prepared as part of a broad range of briefings ahead of policymakers' Nov. 2-3 meeting. Wednesday's report also shed some light on increasing price pressures from supply bottlenecks as well as the tight labor market.
"Many firms raised selling prices indicating a greater ability to pass along cost increases to customers amid strong demand," the Fed districts reported. Inflation has been running well above the Fed's 2% target for the last several months. Policymakers are keenly focused on the drivers of those price rises and whether they will, as most expect, recede next year.
Fed officials are poised to begin reducing the central bank's $120 billion in monthly bond purchases as soon as next month, according to the analysts, despite unexpectedly weak job growth in August and September.
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