DTN Oil Update
Oil Eyes Weekly Gain on Mideast Supply Risks, Stock Draws
VIENNA (DTN) -- Oil futures edged lower Friday morning but were on track for a second consecutive weekly increase amid growing supply risks in Russia and the Middle East. In the U.S., crude inventories posted a steep decline following Hurricane-induced production shut-ins that coincided with the end of emergency oil stock releases.
By 09:15am ET, ICE Brent for December delivery was down $0.15 to trade near $105.77 barrels(bbl) and NYMEX WTI for November delivery fell $0.32 to $97.65 bbl.
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Downstream, NYMEX ULSD for November delivery slid $0.0315 to $4.8141 gallon, and front-month RBOB futures retreated $0.0288 to $3.1514 gallon.
The U.S. dollar index slipped for a second day, down 0.295 points to 101.57 against a basket of foreign currencies.
U.S. Energy Information Administration (EIA) data published Thursday showed commercial crude oil inventories fell by 8.6 million bbl last week after shrinking by 3.19 million bbl a week earlier. Compared to fuel stockpiles, which have rapidly dropped since the beginning of the U.S. war on Iran and continued to hover near seasonal record lows, commercial stocks of crude have during this time held up well, in no small part thanks to more than 132 million bbl of oil from the Strategic Petroleum Reserve landing on the market between the end of March and early October.
While in large part attributable to the temporary loss of offshore production, the second sizable weekly decline in a row also raised concerns over meeting continued unseasonably high domestic demand now that emergency stock releases have ended. According to EIA data, domestic refiners last week processed nearly 1.5 million bpd more crude oil than in the same reporting week last year. Over the past four weeks, domestic crude demand has been outpacing year-ago levels by more than 500,000 barrels per day(bpd).
Supply woes were also fueled by Ukraine not only resuming strikes on Russian refineries after a short-lived break but also vowing to intensify these attacks. Kyiv at the end of last week halted these operations at the behest of U.S. President Donald Trump who had called for an "energy infrastructure ceasefire", but on Thursday abandoned this unilaterally declared and observed energy truce, striking one of Russia's largest refineries that accounts for nearly 5% of the country's crude oil demand.
The week was also marked by events highlighting the fragile nature of the Middle Eastern crude oil supply recovery. Iran has greatly stepped-up attacks on tankers in the Strait of Hormuz, and Houthi rebels in Yemen have repeatedly targeted key Saudi Arabian infrastructure. In reaction, tanker rates have soared to record highs, and flows through the oil chokepoint have once again markedly slowed.
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