DTN Oil

WASHINGTON (DTN) -- After choppy trade most of the session Thursday, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled lower, sending the new front-month December West Texas Intermediate contract below $83 per barrel (bbl) amid a one-two punch of a strengthening U.S. dollar index and lingering concerns over slowing global economic growth amidst pressure from strained supply chains and record run in commodity prices.

At settlement, NYMEX West Texas Intermediate futures for December delivery fell $0.92 to $82.50 bbl after trading as low as $80.79 bbl earlier in the session, while December ICE Brent futures dropped a steeper $1.21 for a $84.61 bbl settlement. November RBOB futures on NYMEX declined 2.83 cents to $2.4801 gallon, and front-month ULSD futures tumbled 4.32cts to $2.5491 gallon.

The U.S. dollar regained upward momentum in afternoon trade Thursday, finishing the session at 93.758, up 0.24% against the basket of foreign currencies and further weighing on the front-month West Texas Intermediate contact. The greenback's move higher follows the better-than-expected print on U.S. jobless claims, which came at 290,000 during the week-ended Oct. 16, the lowest since the beginning of the coronavirus pandemic in March 2020. Continuing claims, meaning the number of Americans collecting unemployment benefits for consecutive weeks, also dropped above the consensus to 2.48 million, a decline of 122,000 from the previous week. The latest claims data reflects a labor market that has made considerable progress in reducing lay-offs since its pandemic-era peak of 6.15 million applications each week. The steady move lower in first-time filings coincides with a jump in demand for labor and continued strength in consumer spending, which could further boost the value of U.S. dollar in coming weeks.

Oil futures snapped a six-session winning streak on Thursday, with analysts pointing to the market's "overbought conditions," which were spurred by expectations of higher fuel demand this winter and tightening global supplies. Globally, analysts estimate about 200,000 barrels per day (bpd) of crude oil is replacing gas as a refinery fuel, noting that low sulfur crudes used in power generation are also growing in demand. Gas-to-oil switching across all sectors of the economy could add up to 500,000 million bpd of new demand, according to International Energy Agency. The Paris-based energy watchdog revised higher world oil demand expectations for this year by 170,000 bpd and by 210,000 bpd for 2022, lifting the annual growth rate in demand for 2021 to 5.5 million bpd for total demand at 96.3 million bpd. For 2022, global oil consumption is forecast to increase annually by another 3.3 million bpd to 99.6 million bpd, which is slightly above the pre-COVID demand level.

A decline in new COVID cases and climbing mobility are currently spurring greater demand for oil, with global gasoline demand about 2% below the pre-COVID demand rate after beginning the year 10% under the baseline. In its latest inventory report, U.S. Energy Information Administration reported domestic gasoline consumption unseasonably surged to 9.6 million bpd as of Oct. 16, supporting the view of increased mobility in the fourth quarter.

Wednesday's inventory report from the EIA showed domestic crude and petroleum product supplies fell by a massive 9.7 million bbl last week, with 5.4 million bbl of that decline realized in gasoline stockpiles alone.

Domestic refiners, meanwhile, continued to reduce run rates, which fell by 2 percentage points to 84.7%, suggesting continued rollout of seasonal maintenance programs. 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 forecast a much smaller 900,000 bbl decline.

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