DTN Oil

CRANBURY, N.J. (DTN) -- October oil futures on the New York Mercantile Exchange and November Brent on the Intercontinental Exchange advanced Friday, with oil products outpacing gains by the crude contracts on tight refining capacity, U.S. economic strength, and reports Russia will slash diesel exports by 25% this month.

Overnight, Bloomberg reported an estimated 135,000-barrel-per-day (bpd) planned decline in Russian diesel loadings from ports on the Black and Baltic seas from August to 466,000 bpd in September, as government officials look to hold back supply for the domestic market to keep fuel prices from rising while refinery operations are reduced for seasonal maintenance.

The news spiked Europe's low sulphur gasoil futures contract for September delivery, which expires on Tuesday, Sept. 12, gaining $0.137 to a $3.065 gallon more than seven-month high, with the October contract rallying $0.11625 to $2.9946 per gallon. NYMEX October ULSD futures gained $0.0868 to $3.2991 per gallon -- the highest settlement on the spot continuous chart since late January.

Distillate supplies remain constrained globally, while a 3.2-million-barrel (bbl) build in U.S. inventory in August through Sept. 1 to 118.602 million bbl still kept domestic stocks 19.308 million bbl below the five-year average, data from the Energy Information Administration shows.

The gasoline contract also rallied on Friday, supported by bullish statistics released Thursday by the EIA showing demand for the transportation fuel surged 253,000 bpd to a 9.321-million-bpd nine-week high in the week leading up to the Labor Day holiday weekend while stocks declined. Gasoline inventory was drawn down 2.666 million bbl to a 214.746-million-bbl 10-month low last week, while 12.03 million bbl or 5.3% below the five-year average.

Reports of an unscheduled shutdown of a fluid catalytic cracking unit at Marathon Petroleum's 593,000 bpd Galveston Bay refinery due to a line leak Thursday night that could remain offline for one week also lent upside support for the gasoline contract. The outage comes ahead of seasonal turnaround activity kicking off in earnest during the second half of September.

October RBOB futures settled $0.0307 higher at $2.6537 per gallon.

NYMEX October West Texas Intermediate and ICE November Brent futures advanced on Friday, retracing Thursday's losses, while holding below 10-month highs on their respective spot continuous charts reached earlier in the week. WTI futures settled up $0.64 at $87.51 per bbl, with an $87.95 intraday high below this week's $88.07-$88.08 double top. Brent futures ended the session with a $0.73 gain at $90.65 bbl, pruning an advance to a $91.02 intraday high, with resistance at this week's $91.10-$91.15 near double top.

The crude contracts rallied during the first week of September following the Tuesday, Sept. 5, announcement by Saudi Arabia that it would extend its 1-million-bpd crude production cut that took effect in July through year's end, joined by Russia's decision to withhold 300,000 bpd in oil exports through the end of December.

Supply concerns outweighed dollar strength, with the U.S. currency strengthening 0.04% to a 105.066 six-month high in index trading against a basket of foreign currencies, as the U.S. economy outperforms the Eurozone and Chinese economies. Atlanta Federal Reserve Bank's GDPNow indicator forecasts a 5.6% annualized growth rate for the U.S. economy in the third quarter, an acceleration from the second quarter's 2.1% growth rate.

Brian L. Milne can be reached at brian.milne@dtn.com