DTN Oil

WASHINGTON, D.C. (DTN) -- Nearby delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange deepened losses Thursday. Both crude benchmarks traded at their lowest level since August as investors look for signs of demand destruction in the U.S. market after government data showed a sharp pullback in gasoline consumption at the end of September. Surging bond yields across major economies in North America and Europe also crippled the outlook for global growth.

The oil complex again came under selling pressure from the headwinds of bearish factors, including a souring outlook for the U.S. economy and exceptionally weak fuel demand. Wednesday's inventory report from the Energy Information Administration showed an outsized 6.5 million barrel (bbl) build in domestic gasoline inventories as demand dropped to the second-lowest weekly rate of the year at the end of September.

Oil traders often look at the four-week average figures to smooth out weekly demand volatility. However, even those figures showed gasoline consumption remained exceptionally weak against pre-pandemic levels, down 10% from the 2019 consumption rate and some 5% below the year-ago level. Gasoline demand slid even below depressed levels of the 2020 pandemic year.

The fresh data underscores the adverse impact of higher gasoline prices on aggregate demand in an otherwise resilient economy. Average gasoline prices in the U.S. hovered near $3.90 per gallon in September, according to the American Automobile Association, just below $4 per gallon considered by many economists to be the breaking point for many American families.

In a research note released Wednesday afternoon, investment bank JP Morgan said, "Demand destruction has begun as summer driving season came to a close." This, in turn, should lead to the end of global stock draws, depressing oil prices into year's end. JP Morgan downgraded its price forecast for Brent to $86 bbl for November and December.

The oil complex only briefly pared some of Wednesday's losses after media airways were hit with a headline suggesting Saudi Arabia might extend a 1 million bpd production cut into early 2024. On Wednesday, Saudi Arabia reaffirmed its commitment to continue with a 1 million bpd output curtailment through the end of the year, but the announcement failed to stop the slide in oil prices.

In another desperate move to prop up prices, Saudi Aramco, the state-owned oil giant, hiked November selling prices to the key markets of Asia and Northwest Europe, according to a company statement.

For Northwest Europe, OSPs were lifted by $1.20 bbl for extra light, and $1.50 for light, medium and heavy grades. For the Mediterranean market, Aramco lifted its price of extra light by $1.50 bbl for November to $7.70 over ICE Brent. Aramco raised the price of its light, heavy and medium grades to the Mediterranean market by $1.90 bbl, with the price for light set at $6.30 over ICE Brent.

Aramco did not change its OSPs for super light, medium and heavy grade oil to its prized market in Asia but raised its price for extra light and light by $0.50 and $0.40, respectively. It is the fifth straight month of increases for Arab light to Asia. Aramco did not change its OSPs for the North American market.

At settlement, West Texas Intermediate November futures on the New York Mercantile Exchange dropped $1.91 or 2% to $82.31 bbl -- the lowest settlement on the spot continuous chart since Aug. 30. International crude benchmark settled the session at $84.07 bbl, down $1.74. Both crude benchmarks lost more than 5.5% in value during Wednesday's session. NYMEX November ULSD futures retreated below $3 gallon to settle down $0.1491 to $2.8687 gallon, and front-month RBOB futures softened $0.0090 to settle the session at $2.18 gallon -- the lowest trade on the spot continuous chart since December 2022.

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