DTN Oil

WASHINGTON, D.C. (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange advanced on Thursday helped by a sharp drop in the U.S. dollar index after government data showed consumer prices in October rose at the slowest annual rate since the beginning of the year, raising hopes that cooling inflation could give the Federal Reserve enough room to slow down rate hikes.

The Core Consumer Price Index, the measure of underlying inflation which excludes food and energy prices, in October increased 0.3% month-on-month, compared with a 0.6% jump reported in September, according to data from the Labor Department. Headline inflation still rose 0.4%, matching the increase reported last month. Compared with a year earlier, inflation eased to 7.7% in the reviewed month. Details of the report showed that rising prices for shelter, new vehicles and personal care were offset by falling prices for airline fares, apparel, used cars and trucks, and medical care.

The Federal Reserve has been struggling to bring down inflation which has risen to a 40-year high in recent months and has been pressuring households' budgets.

So far this year, the Federal Open Market Committee raised its benchmark interest rate six times to 3.75%-4% - the highest since 2008. Although monetary tightening is expected to eventually bring down consumer prices, the hikes also raise the chance that sharply higher borrowing rates -- for mortgages, car purchases and other high-cost expenses -- will tip the economy into recession.

Equities on Wall Street surged in reaction to better-than-expected inflation data, with the S&P 500 rising 3.2% in early trading and the DJI rallying as much as 800 points. NYMEX WTI for December delivery edged higher to $85.97/bbl, and ICE January Brent advanced to $93.11/bbl, up $0.50/bbl on the session. NYMEX December RBOB futures added 0.0184 cents to $2.5655 a gallon, and December ULSD futures advanced 0.0280 cents to $3.6886 a gallon.

On Wednesday, the U.S. Energy Information Administration (EIA) reported commercial oil inventories increased by 3.9 million bbl for the first week of November, contrary to expectations for a 200,000 bbl decrease. Domestic producers, meanwhile, raised crude throughput by 200,000 bpd last week to the highest level since the onset of the pandemic at 12.1 million bpd.

In its Short-Term Energy Outlook released Tuesday afternoon, the EIA forecasted U.S. crude production would increase to 12.3 million bpd next year, matching the prior record high set in 2019.

In the refined fuels complex, gasoline stockpiles plunged for the fourth consecutive week through Nov. 4, down by 899,000 bpd to 205.7 million bbl - which is 8% below the five-year average. Demand for motor gasoline increased last week by 351,000 bpd to 9.011 million bpd after reaching the highest weekly rate of the year of 9.465 million bpd at the start of October. Distillate fuel oil consumption, meanwhile, decreased by 96,000 bpd to 4.161 million bpd last week. Distillate stocks declined 521,000 bbl to 106.3 million bbl, and are now about 24% below the five-year average, the EIA said. At this level, distillate stocks are at their lowest for the end of October since 1951. 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.

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