DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange advanced for a second session early Thursday after comments from U.S. President Joe Biden on additional releases from the Strategic Petroleum Reserve failed to secure investor confidence that the market will be well-balanced this winter, with the ULSD contract once again an outlier.

In a speech Wednesday, Biden confirmed the U.S. Department of Energy is soliciting bids to sell another 15 million barrels (bbl) from the nation's emergency stockpiles for distribution in December, which concludes the 180 million bbl SPR release announced by Biden on March 31. While bearish, Biden didn't articulate any other steps the White House might take to fill-in a potential supply gap in the global market following OPEC+'s decision earlier this month to cut production 2 million barrels per day (bpd), and in case of disruption in Russian oil exports this winter.

For weeks, markets speculated the Biden administration might consider an export ban on refined products to shore up depleted inventory and pressure gasoline prices ahead of midterm elections and heating oil costs, namely in New England states, ahead of winter weather. There's also the risk that Russia might cut oil sales in response to a U.S.-led initiative to cap the selling price of Russian oil.

On Dec. 5, the European Union will embargo all seaborne crude imports out of Russia, followed by a ban on Russian petroleum products sales that goes into effect on Feb. 5.

According to the private vessel-tracking data, Russia has sharply increased its oil exports in recent weeks to 2.32 million bpd, with China, India, and Turkey the top three destinations for Russian crude oil shipments. There's been a recent uptick in Russian crude leaving ports without a final destination assigned to them, but traders speculate almost all tankers carrying Russian crude eventually end up in one of those three countries.

Traders are now anxiously waiting for details on a proposed price cap on Russian oil exports and potential enforcement mechanism to assess the market impact.

Further supporting the oil complex, weekly inventory report released on Wednesday by the U.S. Department of Energy showed commercial crude oil inventories declined by 1.7 million bbl last week, missing expectations for a build. A crude draw was realized even as the SPR dropped by 3.6 million bbl in the reviewed week, following a 7.7 million bbl drawdown from emergency reserves reported during the first week of October.

Domestic refiners decreased run rates for the second straight week, down 0.4% to 89.5% of capacity -- the lowest utilization rate since the final week of April, amid seasonal refinery maintenance programs.

U.S. crude oil production, meanwhile, rose 100,000 bpd last week to 12 million bpd.

In financial markets, the U.S. Dollar Index dropped 0.4% against a basket of foreign currencies to trade near 112.435, further supporting gains for the NYMEX November West Texas Intermediate contract that expires this afternoon. The November contract is up $1.75 at $87.30 in early trading, widening the premium against the December contract to $1.50. ICE December Brent futures added $1.09 to $93.51 bbl. NYMEX November ULSD futures retreated 4.35 cents to $3.8608 gallon, and November RBOB futures advanced 2.9 cents to $2.6810 gallon.

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