DTN Oil

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest delivery and the Brent contract on the Intercontinental Exchange settled mixed on Thursday, with the ULSD contract eking out a gain while West Texas Intermediate and Brent reversed lower from 13- and 10-month highs, respectively, traded overnight on profit taking, with one session remaining in the third quarter.

A projected fourth quarter deficit in new supply against consumption globally rallied oil futures in September, with the International Energy Agency earlier this month forecasting that a Sept. 5 decision by Saudi Arabia to extend a 1 million bpd production cut that first took effect in July through the end of the year joined by a pledge by Russia to continue withholding 300,000 bpd in oil exports over the same period would trigger a 1.2 million bpd supply shortfall. Bank of America Research on Tuesday said it projects global stock levels to be drawn down by 70 million bbl during the fourth quarter.

Evidence of the supply tightness was highlighted on Wednesday by the Energy Information Administration reporting crude stock levels at the WTI delivery point in Cushing, Oklahoma, breached minimum operating levels which are estimated between 16 and 22 million bbl. EIA said Cushing crude stocks totaled 21.958 bbl on Sept. 22 following a seventh consecutive weekly drawdown, a 14-month low, with stocks nationally at a 416.287 million bbl 15-month low, 15.5 million bbl below the five-year average.

The projected global supply deficit for the fourth quarter along with strong refinery margins that incentivize refiners to process more crude oil prompted Bank of America Research to increase its price outlook for Brent for the last three months of 2023, now eyeing a $96 bbl price for the international crude benchmark. On Wednesday, the Federal Reserve Bank of Dallas released its quarterly energy survey in which a majority of executives at 146 oil and gas firms expect WTI to end 2023 at $88 bbl.

NYMEX November WTI futures settled down $1.97 at $91.71 bbl, reversing lower from a $95.03 high, and ICE November Brent ended the session down $1.17 at $95.38 bbl after trading at $97.69 bbl. ICE December Brent ended at a $2.28 bbl discount to the expiring November contract.

The ULSD-Brent crack spread has traded above $40 bbl since Aug. 1, reaching a $54.435 bbl seven-month high on Aug. 25. The RBOB-Brent crack spread held above $30 bbl from early July through the end of August, reaching a $39.68 bbl 13-month high on July 27. Post-Labor Day, the RBOB-Brent crack fell below $20 bbl, steadily declining to just over $10 bbl on Thursday.

NYMEX October ULSD futures settled $0.0033 higher at $3.180 gallon ahead of expiration Friday afternoon, ending at a $0.0476 premium to November delivery in the backwardated market. EIA reported distillate fuel inventories at 120.064 million bbl on Sept. 22, 18.255 million bbl or 13.2% below the five-year average.

NYMEX October RBOB futures settled $0.0933 lower at $2.5053 gallon, narrowing its premium with the November contract by nearly $0.01 to just below $0.04 ahead of Friday's expiration. Gasoline stockpiles totaled 220.503 million bbl on Sept. 22, 4.973 million bbl or 2.2% below the five-year average, EIA data shows.

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