WTI, Brent Higher after Monday's Data Driven Pressure
WASHINGTON, D.C. (DTN) -- Following a mixed session Monday triggered by
weaker-than- expected economic data in the United States and China, West Texas
Intermediates futures nearest delivery on the New York Mercantile Exchange and
Brent crude traded on the Intercontinental Exchange rallied in overnight trade,
propelled by assumptions of a rapidly tightening global oil market, with gains
in petroleum products demand this winter seen far outpacing growth in global
Near 8:45 AM ET, NYMEX WTI for November delivery, which expires Wednesday
afternoon, climbed above $83 bbl, gaining $0.53. The December contract traded
with $0.82 discount to the soon to expire contract. December Brent futures on
ICE pared gains to trade near $84.74 bbl after topping $85 bbl in overnight
trade. November RBOB futures on the NYMEX fell 1.39cts to trade near $1.2423 a
gallon, and front-month ULSD futures slipped 0.34cts to $2.5458 a gallon.
Early morning gains in the oil complex also came on the back of a rapidly
weakening U.S. dollar index that fell more than 0.38% against basket of foreign
currencies after domestic industrial production fell sharply last month. The
Federal Reserve on Monday reported industrial output fell 1.3% in September,
with Hurricane Ida-caused disruptions along Louisiana Coast responsible for
0.6% of the September decline. Ongoing shortages of semiconductors led to a
7.2% plunge in the production of motor vehicles and parts and caused more than
half of the drop off in factory output last month. Weaker industrial data was
compounded by rising production expectations on Monday, with crude output from
the Permian basin of Texas and New Mexico seen growing by 62,000 bpd to 4.8
million bpd from October to November, the Energy Information Administration
said in its drilling productivity report. Total oil output from seven major
shale formations is expected to rise 76,000 bpd to 8.29 million bpd in the
month. U.S. crude production increased 100,000 bpd to 11.4 million bpd during
the first week of October, according to the most recent data available from the
EIA, with the agency last week projecting U.S. output would average 11.3
million bpd this year.
Meanwhile, the number of active oil-directed rigs in the United States
increased by 12 in the most recent week, lifting the total rig count to 445,
240 more than during the comparable week a year ago. Last week's increase,
while the largest one-week uptick since the first week of April, marked the
sixth straight increase. Producers have added 51 rigs since Hurricane Ida
forced as many as 16 rigs offline in late August, early September.
WTI and Brent futures returned to the upside in overnight trade on
expectations that excess demand from gas-to-oil power switching in the European
Union and Asia this winter would far outpace production gains in the U.S. and
OPEC+ nations. OPEC, along with Russia-led partners, agreed earlier this month
to lift their output by 400,000 bpd in November, maintaining their July
agreement of monthly increases of 400,000 bpd through the year as they unwind
production cuts put in place in April 2020 in response to the COVID-19 pandemic
led crash in world oil demand.
The International Energy Agency estimates that global oil demand would grow
by additional 500,000 bpd this winter should energy shortages in Asia and the
EU to worsen during the winter months.
Liubov Georges, 1.646.359.4088, email@example.com, www.dtn.com.
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