DTN Oil

WASHINGTON (DTN) -- Nearby-month oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange reversed higher early Thursday after the International Energy Agency upgraded global demand projections for this year, citing consumption gains across the Asia-Pacific region that have partially offset emerging signs of demand destruction in the North American and European markets.

A combination of stronger fuel consumption in Asia and voluntary production cuts by OPEC+ will keep the global oil market in a substantial deficit for the rest of 2023, according to the IEA's Oil Market Report released Thursday morning. The Paris-based energy watchdog estimates worldwide oil inventories continued to draw in September after stockpiles tumbled by 63.9 million barrels (bbl) in August, underpinned a massive 102.3-million-bbl drawdown in observed crude stocks. Further estimates show OECD industry stocks fell counter-seasonally by 6.5 million bbl in August and remain a substantial 105.3 million bbl below the five-year average.

"OPEC+ could pump 1.3 million barrels per day (bpd) below the call on its crude in the fourth quarter 2023. If extra cuts are unwound in January, the balance could shift to surplus, which would go some way to help replenish depleted inventories." said IEA in its Monthly Oil Report.

On the demand side, IEA projects worldwide oil consumption will grow at a 2.3-million-bpd pace this year, up from 2.1 million bpd seen in last month's outlook. Global oil demand growth is set to slow substantially next year to 900,000 bpd as the post-Covid rebound runs out of steam while economic expansion slows, and energy efficiency improvements weigh on oil use. "Evidence of demand destruction is appearing with preliminary September data showing that U.S. gasoline consumption fell to two-decade lows. Demand destruction has hit emerging markets even harder, with currency effects and removal of fuel subsidies have amplified the rise in gasoline prices," the report said.

Against this backdrop, oil traders await the release of the weekly U.S. inventory report from the Energy Information Administration, delayed by one day due to Monday's holiday. Preliminary data from the American Petroleum Institute released Wednesday afternoon showed an outsized 12.940-million-bbl build occurred in domestic crude oil inventories last week, well above calls for a 900,000-bbl increase. Stocks at the Cushing, Oklahoma, tank farm, the New York Mercantile Exchange delivery point for West Texas Intermediate futures, declined 547,000 bbl.

Gasoline inventory, meanwhile, increased 3.645 million last week, far more than the expected 400,000-bbl gain. Data further showed distillate stocks dropped 3.535 million bbl last week compared with calls for a decline of 300,000 bbl.

Near 7:45 a.m. EDT, the U.S. Dollar Index softened against a basket of foreign currencies to trade near 105.495, lending some price support to the front-month West Texas Intermediate contract. NYMEX WTI futures for November delivery advanced $1.01 bbl to trade near $84.51 bbl, while ICE Brent rallied $1.21 to near $87.02 bbl. NYMEX November ULSD futures jumped to $3.0406 gallon, and front-month RBOB futures traded near $2.2179 gallon.

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