DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange softened in early trade Wednesday despite the American Petroleum Institute reporting domestic crude and gasoline stockpiles tumbled well above consensus during the final week of October and the U.S. dollar extended losses against global peers on the back of mixed economic data ahead of the Federal Open Market Committee's decision on interest rates.

API reported commercial crude oil stocks plummeted 6.53 million barrels (bbl) last week, far exceeding calls for a 200,000-bbl decrease. Stocks at the Cushing, Oklahoma, tank farm, the New York Mercantile Exchange delivery point for West Texas Intermediate futures, meanwhile, gained 883,000 bbl through the week ended Oct. 28, while inventory from the Strategic Petroleum Reserve fell 1.9 million bbl.

Further details of the report showed gasoline stocks tumbled 2.64 million bbl in the reviewed week, nearly three times the expected decline of 900,000 bbl. If confirmed by government data later Wednesday morning, this would mark the third consecutive weekly drawdown from the domestic gasoline stockpiles that currently stand 6% below the five-year average. Distillate inventories added 865,000 bbl compared to an expected 800,000-bbl decline, easing some concerns over tight distillate supplies. The Energy Information Administration last reported nationwide inventories of middle distillates stand about 6 million bbl above 100 million bbl, which is assumed to be the minimum operational level for efficient midstream and downstream industry activity.

Next, oil traders will parse through the official inventory report from the EIA scheduled for 10:30 a.m. EDT.

Near 7:15 a.m. EDTD, NYMEX December WTI slipped $0.22 to $88.14 bbl, with Brent crude for January delivery easing $0.21 to $94.44 bbl. NYMEX December RBOB futures added $0.0028 to $2.5973 gallon, with the gasoline market remaining in backwardation through February 2023 delivery. December ULSD futures declined $0.0209 to $3.6002 gallon.

In financial markets, the U.S. Dollar Index extended losses against a basket of foreign currencies to trade near 111.10 as investors assessed a mixed bag of economic data ahead of the Federal Reserve's decision on interest rates. FOMC will release the statement at 2 p.m. EDT, followed by a news conference by Fed Chairman Jerome Powell 30 minutes later.

Tuesday's economic data showed pockets of the economy are still surprisingly robust, strengthening the case for the Fed to move more aggressively on raising interest rates in December and February.

The Labor Department's monthly survey of Job Openings and Labor Turnover showed new vacancies unexpectedly jumped by nearly 500,000 in September to 10.717 million after an August drop that some analysts thought would mark the beginning of a broader slowdown in the labor market. There were roughly 1.9 open positions for every person looking for work in September, up from 1.7 in August.

The ratio has become more important for the central bank's efforts to cool the tight labor market and bring down stubbornly high inflation. When jobs are plentiful and workers scarce, employees have leverage to ask for a higher wage which puts upward pressure on inflation. For context, U.S. consumer prices rose 0.4% in September and were up 8.2% from a year earlier, with the monthly gain in average salaries increasing by 0.3% from the previous month.

At the same time, a closely watched gauge of manufacturing activity in the United States posted the slowest growth in 2-1/2 years in September, with prices paid by businesses for inputs sliding for the seventh consecutive month, according to the Institute for Supply Management. ISM's manufacturing purchasing managers index fell to 50.2 from 50.9, slightly higher than the consensus estimate for a reading of 50, a level that divides expansion from contraction.

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