DTN Oil

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange ended Thursday's session mixed, with West Texas Intermediate and Brent moving higher from Wednesday's 16-week lows after finding support at their $73.28 and $78.79 200-day moving averages on their respective monthly charts yet paring an earlier advance on bearish sentiment.

Weakness in oil futures manifested on several fronts in early November, with data earlier this week showing exports from China declining for the sixth consecutive month in October, down 6.4% year-on-year, implying slowing global economic growth.

J.P. Morgan on Wednesday said their Oil Demand Tracker suggested demand in China would average 16.8 million bpd during the fourth quarter, although noted high-frequency indicators were mixed.

"Chinese flights have dropped to levels last seen in March 2023," said J.P. Morgan. "Moreover, although trucks on Chinese expressways have rebounded to 55.1 million after the Golden Week holidays, they remain 7% below the peak in 2023."

In mid-October, the Organization of the Petroleum Exporting Countries in their Monthly Oil Market Report projected oil demand in China during the fourth quarter at 16.21 million bpd, 140,000 bpd above the estimated third quarter consumption rate.

WTI and Brent futures prices have fallen back to July levels, erasing not only the geopolitical premium built in values in October following the horrific attack by Hamas on Israeli citizens on Oct. 7, but also the advance in September triggered by the announcement of extended production and export cuts by Saudi Arabia and Russia.

Concerns of a broader conflict in the Middle East as Israel declared war on Hamas, the country's first declaration of war in 50 years, subsided as Iranian-funded Hezbollah militants declined to join Hamas in expanding the war while a strong U.S. naval presence appears to have stayed direct involvement by Iran. The Israeli-Hamas war has not disrupted oil flows in the Middle East, which could have pushed Brent crude oil above $100 bbl.

Oil futures pushed modestly higher on Monday following weekend announcements by Saudi Arabia and Russia that they would extend a 1 million bpd production cut and a 300,000 bpd reduction in oil exports, respectively, into 2024. The market reacted differently in September when the two oil producers said they would extend those supply reductions through the fourth quarter, with Brent rallying to a nearly 11-month high and WTI to a 13-month high.

However, easing concerns over a tight global oil supply-demand disposition for the fourth quarter weighed on prices. On Tuesday, Energy Information Administration in their monthly Short-term Energy Outlook estimated world oil production in the fourth quarter at 102.05 million bpd against global consumption of 101.85 million bpd.

NYMEX December WTI futures settled up $0.41 at $75.74 bbl, with the January contract ending at $75.75. The six-month calendar spread narrowed to $1.01 bbl backwardation after reaching a $10.09 bbl 2023 peak in late September.

ICE January Brent ended back above $80 bbl at $80.01, up $0.47, with the six-month calendar spread ending the session at $1.36 bbl backwardation, down from late September's $9.33 bbl 2023 high.

NYMEX December RBOB futures settled Thursday's session up $0.0323 at $2.1608 gallon, reversing higher from Wednesday's $2.1220 gallon 11-month low on the spot continuous chart. RBOB basis in the underlying New York Harbor spot physical market, which strengthened to a 400-point premium to the December contract, lent upside price support.

The New York Harbor market has tightened amid an extended turnaround at Monroe Energy LLC 195,000 bpd Trainer refinery in Pennsylvania, which began on Sept. 11. Industrial Info Resources said earlier this week Monroe is in the process of restarting four units at the refinery, with maintenance on a 68,000-bpd fluid catalytic cracker unit and 12,000 bpd hydrofluoric alkylation unit scheduled to be completed on Nov. 16.

NYMEX December ULSD futures declined for a third session Thursday, settling down $0.0301 at $2.7191 gallon -- the lowest settlement on the spot continuous chart since July 20. A selloff in ULSD futures accelerated this week after the American Petroleum Institute reported an unexpected 1 million bbl build in U.S. distillate fuel inventory during the week-ended Nov. 3 Tuesday afternoon, with the EIA postponing their statistical report by a week due to system upgrades. On Wednesday, December ULSD futures settled below the 200-day moving average, now at $2.7979 per gallon, adding to the selling.

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