DTN Oil

WASHINGTON (DTN) -- RBOB and West Texas Intermediate futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange advanced early Wednesday after industry data from the American Petroleum Institute detailed across-the-board draws from commercial crude and products inventories for last week as the Biden administration prepares to release the final tranche of 15 million barrels (bbl) of crude oil from the U.S. Strategic Petroleum Reserve announced March 31.

Limiting gains for the oil complex is a dismal set of inflation data released in the eurozone and the United Kingdom on Wednesday morning, with both Germany and Great Britain recording a double-digit rise in annualized consumer prices during September. Germany, EU's largest economy, has been hammered by a relentless rise in consumer prices that climbed to the highest level since the German reunification at 10% in September. Outsized price rises for energy products are still the main reason for high inflation in Germany, but increasing price pressures for other goods, including food and services are becoming more pronounced.

In the UK, inflation has returned to above 10% in September as consumers struggle with the sharpest rise in food prices in more than 40 years. Prices for essential food items like bread, milk, eggs, and cereal shot up to almost 15% from a year ago. UK'S new finance minister, Jeremy Hunt, this week vowed to fight inflation and resolve a budget crisis by slashing spending and abandoning Prime Minister Liz Truss' signature plan for tax cuts for the sake of stabilizing markets.

The Eurozone is likely to slide into recession in the fourth quarter, according to investment bank Citi Group, with the economy under assault amid an energy crisis and high inflation. The International Monetary Fund recently cut its forecasts for world growth and said threats to financial stability were increasing.

Domestically, the API Tuesday afternoon reported U.S. commercial crude oil inventories unexpectedly fell during the week ended Oct. 14, while also detailing a larger-than-expected draw in gasoline inventory and distillate stocks.

API reported commercial crude oil stocks fell 1.27 million bbl last week versus an expected 1.7 million bbl build. Stocks at the Cushing, Oklahoma, tank farm, the delivery point for NYMEX WTI futures, added 89,000 bbl while inventory in the SPR dropped 3.6 million bbl. Gasoline stocks fell 2.17 million bbl last week, above calls for a 1.4 million bbl draw. API reported distillate inventories fell 1.09 million bbl in the week ended Oct. 14, below an expected 2.2 million bbl draw.

Next, investors await the release of official inventory data from the U.S. Energy Information Administration scheduled for 10:30 a.m. EDT.

Also on Wednesday, investors await a speech from U.S. President Joe Biden when he is expected to announce the release of 15 million bbl of additional crude oil from the SPR for delivery in December. The new release would complete the 180 million bbl Biden pledged on March 31 in response to Russia's invasion of Ukraine that disrupted global markets. The delivery of about 165 million bbl of SPR crude will be completed by the end of November.

Biden's speech will come two weeks after Organization of the Petroleum Exporting Countries together with Russia-led partners agreed to cut oil production by 2 million bpd beginning in November.

EIA last reported SPR crude inventory at 408.7 million bbl as of Oct. 7, having fallen below commercial crude stockpiles that last totaled 439.1 million bbl. SPR crude oil totaled 617.77 million bbl on Oct. 1, 2021.

The Energy Department announced in May it was planning a new method of buybacks for the SPR that would allow for a "competitive, fixed-price bid process," with prices potentially locked in well before crude is delivered. A White House statement released late Tuesday indicated the Biden administration would look to buy the oil to replenish the SPR when prices are at or below a $67 to $72 bbl range.

Near 7:30 a.m. EDT, NYMEX November WTI futures advanced $0.99 to $83.83 bbl, with next-month December futures trading at a $0.84 discount to the expiring contract. ICE December Brent futures added $0.74 to $90.78 bbl. NYMEX November ULSD futures retreated 6.85 cents to $3.9250 gallon, and November RBOB futures added 2.22 cents to $2.5728 a gallon.

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