DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange mostly settled Wednesday's session higher, with the ULSD contract again the outlier. Traders were monitoring a tropical depression in the central Atlantic Ocean that is currently tracking toward the Leeward Islands in what could be the first storm to move into the Gulf of Mexico's oil and gas region in 2022.

Tropical Depression Seven developed earlier Wednesday over the central Atlantic and is forecast to strengthen into a tropical storm as it advances toward the Leeward Islands. Further details show the storm could move through the Leeward Islands on Friday and reach the Virgin Islands and Puerto Rico over the weekend.

Traders are especially attuned to storm activity in September, the peak hurricane season in the Atlantic Basin that so far this year has proved inconsequential for the oil and gas industry. Atlantic weather systems have severely affected U.S. oil and gas operations in the past. For context, at its peak, Hurricane Ida shut in 95.65% of Gulf of Mexico oil production on Aug. 29, 2021, and 94.47% of gas production in the region.

NYMEX October West Texas Intermediate futures added $1.17 to $88.48 per barrel (bbl) Wednesday, and ICE November Brent advanced $0.93 for a $94.10 per bbl settlement, with an improved global demand outlook for the rest of the year projected by the International Energy Agency also lending upside support.

IEA Wednesday morning raised its global demand outlook for the balance of 2022, citing soaring oil use for power generation and gas-to-oil switching across large economies in Asia and the European Union.

In its closely watched monthly Oil Market Report, IEA lifted its global demand forecast by 380,000 bpd this year for annualized growth of 2.1 million bpd. World oil demand is now seen at 99.7 million bpd in 2022 and 101.8 million bpd in 2023.

"With several regions experiencing blazing heatwaves, the latest data confirm increased oil burn in power generation, especially in Europe and Asia. Fuel switching is also taking place in European industry, including refining," said IEA.

Wednesday's higher settlement for RBOB futures came despite mostly bearish data from the U.S. Energy Information Administration showing U.S. gasoline demand declined 233,000 bpd to 8.494 million bpd during the week ended Sept. 9. The latest data adds to a trend, with gasoline consumption in the United States over the most recent four weeks at 8.6 million bpd, down a full 9% against the comparable year-ago period.

The prospect of a national rail strike that could upend ethanol deliveries offset weak demand data for gasoline, with NYMEX October RBOB futures adding 4.41 cents to settle at $2.5245 per gallon.

In contrast, October ULSD futures plummeted 16.24 cents to a $3.3789-per-gallon settlement, with the more than 4% falloff spurred by concerns higher interest rates would push the U.S. economy into recession. Wednesday's EIA data, showing distillate inventories spiked 4.2 million bbl last week as demand fell to the lowest level since the end of 2020 at 3.123 million bpd, down more than 663,000 bpd from last year, added to the selling pressure.

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