DTN Oil

WASHINGTON (DTN) -- After posting the first monthly gain since May, West Texas Intermediate futures on the New York Mercantile Exchange and Intercontinental Exchange Brent crude settled the first trading day of November with solid gains. Futures were underpinned by a weakening U.S. dollar ahead of the Federal Open Market Committee's two-day policy meeting, and low inventory levels of middle distillates on both sides of the Atlantic Basin.

The American Petroleum Institute is scheduled to release its weekly inventory report at 4:30 p.m. EDT, with market participants forecasting another large drop occurred in domestic distillate inventories that would push nationwide stockpiles below 100 million barrels (bbl). This is assumed to be the minimum operational level for efficient midstream and downstream industry activity. Analysts expect distillate stockpiles to fall by 800,000 bbl from the previous week, with forecasts ranging from a decrease of 2 million bbl to an increase of 900,000 bbl.

Gasoline stockpiles, meanwhile, are seen falling by 900,000 bbl in the reviewed week after declining by a hefty 1.47 million bbl in the third week of October. Nationwide gasoline stocks currently stand 6% below the five-year average. U.S. commercial crude-oil inventories are projected to have declined by 200,000 bbl for the final week of October.

The final series of U.S. economic data before the Federal Reserve's two-day policy meeting showed the economy is still surprisingly robust, strengthening the case for the Federal Reserve to move more aggressively on raising interest rates towards the end of the year.

The Labor Department's monthly survey of Job Openings and Labor Turnover showed a sharp increase in new vacancies in September, after an August drop that some analysts thought would mark the beginning of a broader slowdown. New job openings rose by nearly half a million to 10.717 million from an August figure that itself was revised up to 10.280 million.

At the same time, a closely watched gauge of business activity also turned out a little stronger than expected. The Institute for Supply Management's manufacturing purchasing managers index fell to 50.2 from 50.9 -- slightly higher than consensus forecasts for 50, the level that typically divides expansion from contraction.

New economic data coincides with Tuesday's start of the FOMC's monetary policy meeting, with Fed officials widely expected to lift the federal funds rate another 75 basis points for the fourth meeting in a row to a 3.75% to 4% target range. Some Fed officials felt at the September meeting that the central bank could slow the pace of rate hikes at some point and assess the impact of previous rate hikes on inflation and aggregate demand, according to minutes from the meeting. The minutes prompted growing speculation that the Fed is considering slowing the pace of rate hikes following this week's meeting, with CME's FedWatch Tool showing a 41.8% probability for another 75-point increase in the federal funds rate at their Dec. 13-14 meeting, down from a 50.6% probability seen just a day earlier.

The U.S. dollar deepened losses in afternoon trading Tuesday, down 0.61% against a basket of foreign currencies to near 111.359, lending tepid support for front-month West Texas Intermediate which has an inverse relationship with the greenback. NYMEX December WTI rallied $1.84 per bbl to $88.37 per bbl. International crude benchmark Brent for January delivery advanced $1.84 to $94.65 per bbl.

NYMEX December RBOB futures gained 6.88 cents to $2.5945 per gallon, with the gasoline market remaining in backwardation through February 2023 delivery. December ULSD futures declined 5.30 cents to $3.6211 per gallon after gapping down following the expiration of the November contract Monday afternoon.

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