DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange flipped between modest gains and losses early Wednesday after preliminary data from the American Petroleum Institute showed total U.S. oil and petroleum products supplies declined for the second straight week, while rising crude oil exports from Russian ports in the Baltic and Black seas prompted investors to question Moscow's adherence to a supply pact with Saudi Arabia.

Russian crude oil exports rose to a three-month high of 3.53 million barrels per day (bpd) in the seven-day period ending Oct. 22, according to the tanker-tracking data compiled and assessed by Bloomberg. This lifted the less volatile four-week average figure to 3.5 million bpd, which is around 300,000 bpd above a 3.2-million-bpd target.

Earlier this month, Russia said it would prolong a pledged reduction in crude oil exports through the end of 2023 and hinted it might opt for further extension into next year. Additionally, tougher sanctions' enforcement on international shipping companies that transport Russian crude above the $60 per barrel (bbl) price cap had some in the market speculate Russian crude flows would take a hit. So far, these concerns have not materialized, adding to the bearish sentiment in the oil market.

Separately, API data released late Tuesday showed U.S. commercial crude oil inventory was drawn down 2.668 million bbl last week, missing an expected 10,000-bbl uptick. Supply at the Cushing, Oklahoma, tank farm, the NYMEX delivery point for West Texas Intermediate futures, rose 513,00 bbl.

The report also detailed a 4.169-million-bbl draw in gasoline supply for last week, far more than calls for a 300,000-bbl decline, and a 2.313-million-bbl drop in distillate inventories, more than twice an expected 1.1 million-bbl-drawdown.

Next, oil traders await the release of official inventory data from the U.S. Energy Information Administration, scheduled for 10:30 a.m. EDT.

Near 7:30 a.m. EDT, NYMEX WTI futures for December delivery traded little changed near $83.80 bbl, while Brent December futures on ICE added $0.16 to $88.22 bbl. NYMEX November ULSD futures dropped $0.0294 to $3.0155 gallon, while front-month RBOB futures advanced $0.0148 to $2.2824 gallon.

On the macroeconomic data front, U.S. Purchasing Managers Index for the month of October showed a surprise expansion in both manufacturing and service business activity after a stagnant output seen in August and September. Manufacturers and service providers alike reported improved activity levels as the downturn in demand moderated.

"Hopes of a soft landing for the U.S. economy will be encouraged by the improved situation seen in October," said Chris Williamson, chief business economist at S&P Global Market Intelligence. "The S&P Global PMI survey has been among the most downbeat economic indicators in recent months, so the upturn in U.S. output growth signaled at the start of the fourth quarter is good news."

In reaction to the data, the U.S. dollar rallied against a basket of foreign currencies to settle Tuesday's session at 106.080, as investors repriced the strength of the U.S. economy and a potential for more rate hikes by the Federal Reserve in coming months. CME FedWatch Tool shows increased odds for a 0.25% hike in the federal funds rate at the Federal Open Market Committee's meeting in December.

In early trading Wednesday, the U.S. dollar is up 0.2% at 106.260.

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