DTN Oil

WASHINGTON (DTN) -- West Texas Intermediate and ULSD futures traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled Wednesday's session with gains between 2.5% and 4%. Futures were propelled by a record surge in U.S. crude and refined products exports for the week ended Oct. 21 while traders report widening diesel shortages along the East Coast ahead of the start of winter heating season.

Distillate stocks in New England PADD 1A and Central Atlantic PADD 1B fell again last week to the lowest level on record for the months just before the winter, and to a 10-year low in Lower Atlantic PADD 1C, exacerbating fears over potential fuel rationing this heating season which begins Nov. 1.

Historically low distillate inventory along the East Coast is realized despite full pipelines delivering to the region, with the Colonial Pipeline today extending a freeze on nominations on its main distillate line that originates in Houston because demand by shippers to move fuel on the pipeline exceeds the pipeline's 1.16 million barrels per day (bpd) throughput capacity.

Diesel scarcity has prompted some traders to divert cargoes carrying distillates originally bound for Europe back to the East Coast, according to tanker tracking data. Meanwhile, U.S. exports of crude and refined products still surged to a record-high 11.4 million bpd last week despite domestic gasoline and distillate stocks running at historically low levels, U.S. Energy Information Administration data show.

Nationwide gasoline inventories fell again last week to 6% below the five-year average, while distillate stockpiles stand 23% below the historical baseline and are at the lowest point ever for the months before winter. Goldman Sachs in a note to clients this week said underinvestment in the nation's refining capacity, exacerbated by refinery closures and disruptions, is leading to a shortage of refined products, especially diesel, whose stocks are at "extremely low levels," said the bank. Goldman sees an "incredibly challenging" first quarter as the Group of 7 embargo on Russian products goes into effect early next year.

Further boosting the oil complex, U.S. dollar index extended steep losses into a fourth consecutive session Wednesday, falling 1.15% against a basket of foreign currencies to settle at 1-1/2 month low of 109.535, pressured, in part, by weaker-than-expected economic data released this week.

The Conference Board reported on Tuesday that consumer confidence in the United States plunged to a three-month low in October, driven by increasing concern by consumers in their assessment of current business and labor market conditions. The expectations index also fell below the level that is typically associated with a recession. Overall, Americans now feel more pessimistic about the health of the economy than at any point since April 2021.

Dismal reading on U.S. consumer confidence follows a bearish dataset on business activity in manufacturing and the service sector of the economy, with both measures falling deep into contraction last month. Except for the pandemic months of April and May 2020, the rate of decrease was the second-fastest since the 2008 Global Financial Crisis, illustrating deteriorating economic conditions.

At settlement, December WTI futures surged $2.59 to $87.91 per bbl, and ICE December Brent advanced $2.17 to $95.69 per bbl. ULSD futures for November delivery rallied more than 15.29 cents to a four-month high $4.1201 per gallon, and November RBOB futures softened 1.66 cents to $2.8994 per gallon.

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