DTN Oil

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange declined for a second session on Wednesday. This sent front-month West Texas Intermediate to the lowest settlement since July 17 amid a one-two punch of slowing demand and a stronger U.S. dollar index that weighed on the U.S. crude benchmark.

Additionally, the American Petroleum Institute reported late Tuesday that nationwide oil inventories spiked 11.9 million barrels (bbl) last week, marking the third-largest build of the year and well above expectations for a 200,000 bbl gain. Stockpiles in Cushing, Oklahoma, also rose 1.1 million bbl from the previous week. More bearish data points could be found in distillate inventories, with stockpiles rising by 1 million bbl in the reviewed week compared to calls for stocks to drop by 2 million bbl.

Distillate consumption in the United States averaged a mere 3.682 million barrels per day (bpd) in the most recent week, which is a full 12% below the five-year average, according to the U.S. Energy Information Administration. On a four-week average basis, which smooths out weekly volatility, distillate demand is still running 4.5% below year-ago levels at 4 million bpd.

Traders could not get an insight into demand figures for last week since the Energy Information Administration delayed the release of its weekly oil inventory report until Nov. 15 to complete a planned system upgrade.

Further weighing on the oil complex, the U.S. dollar index continued higher against the basket of foreign currencies on Wednesday to settle at 105.448 as investors continued to reprice the path of the Fed's funds rate heading into next year. U.S. equities have rallied since last week's Federal Reserve decision to keep interest rates unchanged for the second consecutive meeting as Federal Reserve Chairman Jerome Powell appeared to suggest the end of the most aggressive monetary tightening campaign in two decades.

This view was lent further support by a softer-than-expected October employment report, which showed job growth slowed markedly last month as the unemployment rate climbed, suggesting the labor market has more slack than previously thought.

Earlier in the week, oil futures came under selling pressure from weaker-than-expected trade data out of China, the world's second-largest oil consumer. Exports declined for the sixth consecutive month in October, dropping 6.4% from a year earlier as shipments into major trading partners in Europe and North America deteriorated further. The decline in trade volumes underlined persistent headwinds for Asia's economic growth and clouded the overall demand outlook for oil markets in the winter months.

At settlement, West Texas Intermediate December futures fell to $75.33 bbl, down $2.04 in afternoon session, and the international crude benchmark Brent for January delivery declined $2.07 to $79.54 bbl. NYMEX December ULSD dropped back $0.0892 to $2.7492 gallon and front-month RBOB on NYMEX retreated to $2.1285 gallon, down $0.0392 gallon on a session.

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