DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange reversed lower early Wednesday after industry data reported a larger-than-expected build occurred in domestic crude oil inventories last week as investors geared up for a series of macroeconomic data releases ahead of the Thanksgiving holiday in the United States that will shrink trading volumes heading into the weekend.

Wednesday's macroeconomic data releases include U.S. weekly unemployment claims, durable goods orders, and the consumer sentiment index for the second part of November, scheduled for 8:30 a.m. and 10 a.m. EST, respectively.

Jobless applications have risen steadily in recent weeks, climbing to a three-month high 231,000 for first-time filings and a two-year high 1.87 million on a continuous metric, suggesting the labor market is losing its post-COVID recovery momentum. Jobless rate in the U.S. has risen from a 50-year low 3.4% seen at the start of the year to 3.9% in October.

An uptrend in the unemployment rate reflects a weakening economy and a pullback in consumer spending, with October's retail sales printing a negative reading for the first time in seven months. Durable goods orders are expected to show further weakness in aggregate demand, seen falling to a negative 3.2% from a 4.7% gain seen in September.

Should this morning's macro data come in even softer-than-expected, it would pressure U.S. Dollar Index that strengthened 0.11% against a basket of foreign currencies to trade near 103.560.

Wednesday's move lower in the oil complex was triggered by inventory survey released late Tuesday by the American Petroleum Institute showing commercial crude oil supplies in the U.S. increased by a much larger-than-expected 9.05 million barrels (bbl) last week. Market consensus called for just a 100,000-bbl gain. The stock build followed a massive 17.5-million-bbl increase in commercial oil stockpiles over the prior two weeks. At 439.4 million bbl, nationwide oil stockpiles currently stand 2% below the five-year average.

Supply at the Cushing, Oklahoma, tank farm, the NYMEX delivery point for West Texas Intermediate futures, added 640,000 bbl.

Domestic oil supplies have grown at a rapid pace in recent weeks, suggesting market fundamentals have been less bullish than previously thought. Oil traders typically look at the U.S. inventory level as a proxy for market balances globally.

In refined products, the survey showed gasoline supply fell 1.79 million bbl through Nov. 17, about three times calls for a 600,000-bbl draw, while distillate inventory dropped 3.51 million bbl compared with an expected 600,000-bbl draw.

Aside from the U.S. inventory reports, market participants continue to monitor for any hints of a potential change in the production policy by OPEC+, with ministers scheduled to meet in Vienna on Sunday (11/26).

The base-case scenario is that the bloc's largest producers, Saudi Arabia and Russia, would at a minimum extend voluntary output and export cuts of 1.3 million barrels per day (bpd) into the first quarter 2024. Interestingly, Russia reduced its oil exports by 580,000 bpd in the most recent week to a three-month low 2.7 million bpd compared to a pledged reduction of 300,000 bpd. The move is likely driven by considerations of higher export volumes seen over the month of October.

The most recent reports indicate Saudi Arabia expressed its dissatisfaction with production levels from other members of the OPEC+ coalition, suggesting a potential rift within the coalition. The situation remains fluid.

Near 7:45 a.m. EST, January WTI futures retreated more than $2 to $75.50 bbl, while ICE January Brent futures declined $2.20 to $80.21 bbl. NYMEX December ULSD futures pulled back $0.0458 to $2.8801 gallon, with the December RBOB contract posting a $0.0405 loss to trade near $2.1933 gallon.

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