DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange fell more than 1% early Wednesday after industry data reported U.S. commercial crude oil and distillate inventories increased more than expected for the week ended Nov. 12, easing concern over a tight physical market, while also pressured by U.S. dollar strength, trading at a 96.270 fresh 16-month high overnight on bullish domestic economic data.

The U.S. Dollar Index has since reversed down, trading at 95.845 near 7:30 a.m. ET, with NYMEX West Texas Intermediate futures for December delivery trading on either side of $80 per barrel (bbl), down $0.50. Brent January futures declined about $0.45 to trade at $82 bbl, while NYMEX RBOB December futures slid 1.5 cents to near $2.3345 gallon and front-month NYMEX ULSD futures fell 1.9 cents to near $2.4120 gallon.

The American Petroleum Institute reported late Tuesday nationwide crude oil inventories added 655,000 bbl last week, slightly above calls for a build of 500,000 bbl. The report also showed distillate supplies increased 107,000 bbl in the reviewed week, despite what should be a seasonal peak for diesel fuel consumption. DTN Refined Fuels Demand data revealed demand for distillates in the United States advanced 0.2%, while remaining 4.5% above pre-COVID levels.

Gasoline stockpiles slid 2.792 million bbl, more than four times estimates for stocks to have decreased 600,000 bbl. Domestic gasoline demand decreased 0.2% last week, according to DTN Refined Fuels Demand data, with total consumption weakening 1.9% compared to the same week in 2019. If gasoline demand follows pre-COVID seasonality, it would trend lower through the fourth quarter before a final surge amid the Christmas holiday.

Oil complex also came under selling pressure following the release of the International Energy Agency's monthly Oil Market Report on Tuesday, showing global production growth early next year will likely outpace gains in demand, leading to hefty builds in global inventories.

"World oil supply is set to rise 1.5 million barrels per day (bpd) over November and December, with the U.S. providing 400,000 bpd of the gain," said IEA. "Saudi Arabia and Russia combined would account for 330,000 bpd in line with OPEC+ targets. Total oil supply had already leapt 1.4 million bpd month-on-month in October after the U.S. rebounded from Hurricane Ida."

In outside markets, the U.S. dollar rallied Tuesday into overnight trade after retail sales and industrial production for October was stronger-than-expected, spurring hopes for faster economic growth in the fourth quarter. Spending rose sharply last month, up 1.7% from September's 0.8% gain, signaling households continue to tap into savings even with the fastest rise in inflation in decades.

The fresh data might also suggest Americans simply started their holiday shopping earlier than usual, trying to avoid delivery delays and empty shelves, with supply disruptions everywhere. The elevated spending level suggests solid holiday sales this season, lifting economic growth. J.P. Morgan said on Tuesday it was upgrading its growth expectations, raising its forecast for fourth-quarter U.S. gross domestic product to 5% from 4%. Meanwhile, industrial production rebounded 1.6% last month after a 1.3% plunge in September, the Federal Reserve reported Tuesday. The gain was double what had been expected.

The September weakness in industrial output reflected severe shortages of semiconductor chips that contributed to a fall in auto production and the lingering impacts of Hurricane Ida. Industrial output in October was also helped by an 11% jump in production of motor vehicles and parts, after two months of declines caused by severe supply chain shortages of the semiconductors needed as component parts.

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