October ULSD Gains on Tight Diesel Supplies; Crude Slips

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Except for the ULSD October contract that advanced 1% on tight diesel supplies, oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange slipped in early morning trade Monday as investors awaited fresh clues on the pace of consumer price pressures in the U.S. economy, with the release of August inflation and retail sales data scheduled for Wednesday and Thursday this week.

Monday's move lower in the crude complex came despite a markedly weaker U.S. dollar that came under pressure from overnight economic data out of China where consumer prices returned into positive territory in August amid signs of a stabilizing macroeconomic environment. China's inflation on the consumer level rose 0.1% in August from a year earlier, according to data from the National Bureau of Statistics, after falling to a negative 0.3% in the prior month. Although August figures are still way short of the 3% inflation target set by China's central bank, it might suggest consumer demand in the world's second largest economy has bottomed out in the third quarter 2023. Consumer prices across all major economies are expected to make a U-shaped recovery into the autumn months thanks in part to rising crude prices.

Against these headwinds, investors are awaiting the release of the U.S. inflation report for August that is expected to show consumer prices rose at a quicker pace of 3.6% from a year earlier and the closely watched core prices climbed above 4%.

Should the inflation report deliver an upside surprise, this should spur renewed gains for the dollar index that slid below the key 105-level overnight but failed to lend price support to the crude complex. NYMEX October West Texas Intermediate futures slipped $0.46 barrel (bbl) to trade near $87.04 bbl and the international crude benchmark Brent for November delivery held above $90 bbl to trade near $90.25 bbl.

The crude contracts rallied during the first week of September following Tuesday's (9/5) announcement by Saudi Arabia that it would extend its 1-million-barrels-per-day (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.

In the refined product complex, NYMEX October ULSD futures gained $0.0390 to $3.3381 gallon -- the highest trade on the spot continuous chart since late January.

Distillate supplies remain constrained globally, while a 3.2-million-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 edged up Monday, supported by bullish statistics released last week from 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. October RBOB futures edge up $0.0043 to $2.6557 gallon.

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

Liubov Georges