DTN Oil

WASHINGTON, D.C. (DTN) -- With the U.S. dollar extending losses into the fourth consecutive session, oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange pushed higher early Wednesday, finding additional support from acute and widening diesel shortages along the East Coast that are heightening concern over historically low inventory levels heading into the heating season.

Diesel shortages in New England and the broader New York areas are now quickly spreading to states in the Southeast and westward, with parts of Tennessee seeing particularly severe shortages. Bloomberg News reported this morning some operators in the area now require 72-hour notice for deliveries to secure fuel and freight.

Nationwide distillate inventories have been running consistently below the five-year average for much of the year, with strong exports and domestic demand drawing down stockpiles. Now, with the heating season beginning in less than a week, low supply is heightening concern over the possibility of supply outages in New England states in particular, where the largest concentration of households and businesses draw on heating oil for space heating needs.

The shortages are also again driving diesel prices higher, lifting costs for trucking, further exacerbating inflationary pressures.

Against this backdrop, the U.S. dollar index declined more than 0.6% against a basket of foreign currencies to trade near 110.130, a more than one-month low, pressured, in part, by weaker-than-expected economic data released this week.

The Conference Board reported on Tuesday 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.

"Concerns about inflation -- which had been receding since July -- picked up again, with both gas and food prices serving as main drivers," said Lynn Franco, senior director of economic indicators at the Conference Board. "Looking ahead, inflationary pressures will continue to pose strong headwinds to consumer confidence and spending, which could result in a challenging holiday season for retailers."

The dismal reading on U.S. consumer confidence follows a bearish dataset on business activity in manufacturing and service sectors 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.

Wednesday's move higher in the oil complex also follows an inventory report from the American Petroleum Institute showing commercial crude and distillate fuel stocks increased last week, while gasoline inventories declined by a larger-than-expected margin. Further details of the report showed commercial crude oil stocks rose 4.52 million bbl last week, well above calls for inventories to have added 370,000 bbl. Stocks at the Cushing, Oklahoma tank farm, the New York Mercantile Exchange delivery point for West Texas Intermediate futures, increased 740,000 bbl while inventory from the Strategic Petroleum Reserve dropped 3.4 million bbl. At 405.135 million bbl, emergency reserves currently stand at their lowest level since 1984 when stocks were below 400 million bbl. The back-to-back withdrawals from the SPR are part of a more than six-month effort by the Biden administration to reduce retail gasoline prices which spiked to more than $5 per gallon in June.

Gasoline stocks, meanwhile, tumbled 2.278 million bbl last week, above an expected 1.03 million bbl draw. API reported distillate inventories added 635,000 bbl in the week ended Oct. 21 versus an expected draw of 1.02 million bbl.

Next, investors await the release of official data from the U.S. Energy Information Administration scheduled for 10:30 AM ET.

Near 9 AM ET, December WTI futures gained more than $1 to trade near $86.50 bbl, and ICE December Brent advanced $0.90 to $94.43 bbl. ULSD futures for November delivery rallied more than 5.75 cents to $4.0260 gallon, and November RBOB futures jumped 4.4 cents to $2.9605 gallon.

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