Morning Market Overview
New York Mercantile Exchange oil futures nearest delivery and the Brent contract on the Intercontinental Exchange settled mixed, although the divergence by oil products was extreme while West Texas Intermediate settled at a nearly eight-month low after slipping into bear market territory intraday for a second session. Weekly oil statistics released midmorning were the latest bearish development for oil futures, although supply data for distillate fuel was bullish—showing inventory continued to decline while demand outpaced year-ago during October.
The EIA report was bearish for gasoline, with an unexpected build and data showing implied demand slipped below the five-year average in late October, ostensibly on demand destruction amid high retail prices, pressed RBOB futures to the lowest settlement on the spot continuous chart in 11 months. An eye popper in today’s EIA report was a 400,000 bpd surge in U.S. crude production to an 11.6 million bpd record high last week. The large increase comes on the heels of monthly data released Oct. 31 showing U.S. production was 300,000 bpd higher in August at 11.3 million bpd than initially reported in weekly data.
The higher production was a key component in boosting commercial crude supply to its seventh consecutive weekly build, with stocks near a five-month high. An unexpected 1.9 million bbl build in gasoline stocks during the week- ended Nov. 2 was due partly to shrinking demand, with gasoline inventory at 228.0 million bbl 18.5 million bbl or 8.8% above year ago. Implied gasoline demand slumped below the five-year average to a 9.099 million bpd four-week low, while down 135,000 bpd or 1.4% during the four weeks ended Nov. 2 against the comparable year-ago period.
In contrast, distillate inventories were drawn down for a seventh straight week to a 15-week low at 122.9 million bbl. Implied distillates demand averaged 236,000 bpd or 6.1% above year ago during the four weeks ended Nov. 2, EIA data shows. Demand for distillates is expected to increase as a cold front heads towards the U.S. Northeast. The National Oceanic Atmospheric Administration’s Climate Prediction Center is forecasting below normal temperatures in the Northeast in its 6-10 day and 8-14 day outlooks.