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Oil futures on Wednesday posted their lowest finish since October after official U.S. government data showed an increase in domestic crude inventories for a second week in a row.
“Ongoing subdued refining activity has led to another crude inventory build, despite ongoing strength in exports,” said Matt Smith, lead oil analyst, Americas, at Kpler, in emailed comments.
The Energy Information Administration reported on Wednesday that U.S. crude inventories rose by 3.3 million barrels for the week ended Oct. 29.
On average, analysts polled by S&P Global Platts expected a 300,000-barrel climb. The American Petroleum Institute on Tuesday reported a 3.6 million-barrel increase.
West Texas Intermediate crude for December delivery
CL00,
CLZ21,
fell $3.05, or 3.6%, to settle at $80.86 a barrel on the New York Mercantile Exchange. January Brent crude
BRN00,
BRNF22,
the global benchmark, fell $2.73, or 3.2%, at $81.99 a barrel on ICE Futures Europe.
Based on the front-month contracts, WTI’s settlement was the lowest settlement since Oct. 13, while Brent crude saw the lowest finish since Oct. 7, according to Dow Jones Market Data.
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The EIA also reported a weekly inventory decline of 1.5 million barrels for gasoline, but distillate stockpiles edged up by 2.2 million barrels. The S&P Global Platts survey expected supplies to decrease by 900,000 barrels for gasoline and 1.5 million barrels for distillates.
Distillates saw a build as “implied demand ebbed, while gasoline inventories drew as implied demand was reported as very strong for the time of year — although the weekly number is to be taken with a pinch of salt given its volatility,” said Smith.
The EIA data showed crude stocks at the Cushing, Okla., Nymex delivery hub down by 900,000 barrels for the week, but total weekly domestic petroleum production climbed by 200,000 barrels to 11.5 million barrels per day.
Petroleum production was higher, “bolstering the supply side of the picture along with another [Strategic Petroleum Reserve] release hitting commercial inventories, while imports were nearly flat week-on-week,” Smith said.
December gasoline
RBZ21,
fell nearly 4.6% to $2.339 a gallon and December heating oil
HOZ21,
lost 2.9% to $2.435 a gallon.
Phil Flynn, senior market analyst at The Price Futures Group, said the market should start to see overall oil inventories “start to draw down, and probably fairly significantly, in the coming weeks,” adding that the build in crude inventories was exaggerated because of maintenance season for refineries. As the refiners come out of maintenance, the market will better balance with the situation at Cushing and that’s “definitely something that will support the market.”
Meanwhile, crude prices continued to trade near the session’s lows after the Federal Reserve announced Wednesday that it will start scaling back its monthly bond purchases. as expected. The policy makers also repeated its view that higher inflation readings are “transitory.”
A meeting Thursday of the Organization of the Petroleum Exporting Countries and its allies — a group known as OPEC+ — is also in focus. U.S. President Joe Biden and others have ramped up pressure on the group to boost output more aggressively than currently planned. Biden on Wednesday told reporters at the COP26 climate summit in Glasgow that it was “not right” for Russia, Saudi Arabia and other producers to hold back production to boost prices, news reports said.
Producers, however, have appeared reluctant to move beyond plans to increase output beyond the monthly increments of 400,000 barrels a day they previously agreed. Moreover, producers have struggled to meet those production goals.
Read: OPEC+ needs to ‘thread the needle’ between higher oil prices and losing market share
Also on Nymex Wednesday, December natural gas
NGZ21,
settled at $5.67 per million British thermal units, up 2.3%, extending its gain from a day earlier, when prices rose by 6.9%. The EIA’s weekly update on U.S. natural-gas supplies will be released Thursday.
