Crude Futures Decline on Strong U.S. Economic Data

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Crude futures experienced a significant drop, falling over $1 per barrel on Thursday. This decline came after the release of robust U.S. economic data, which heightened expectations that the Federal Reserve may increase interest rates to control inflation.

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Crude Contracts

At 11:50 a.m., the NYMEX December West Texas Intermediate contract dropped by $1.50 to $83.90 per barrel. Similarly, the January WTI contract also fell by the same amount to $83.20 per barrel.

The December ICE Brent contract, based in London, saw a decline of $1.50 and settled at $88.65 per barrel. January Brent followed suit, decreasing by $1.40 to reach $87.85 per barrel.

Refined Product Futures

Refined product futures displayed mixed results during this period. The more-active NYMEX December RBOB contract declined by 1.65 cents, closing at $2.252 per gallon. On the other hand, the front-month November RBOB contract lowered by 1.55 cents, reaching $2.2690 per gallon.

The NYMEX December ULSD contract rose by 0.85 cent, settling at $2.965 per gallon. Additionally, November ULSD added 1.15 cents and stood at $3.042 per gallon.

U.S. Economic Growth and Potential Challenges

The government reported a surprising 4.9% annual rate increase in GDP for the third quarter, surpassing economists’ expectations. Despite this positive outcome, the combination of rising long-term interest rates (as indicated by the 10-year Treasury yields), geopolitical tensions, and the potential U.S. government shutdown may put the resilience of the world’s largest economy to the test.

Analyst Perspectives

Some analysts suggest that the petroleum market may have been overbought due to heightened violence between Israel and Hamas militants. The recent weakness in petroleum futures is attributed to perceptions that the conflict may not escalate further.

Impact on Spot Refined Product Markets

In U.S. spot refined product markets, Chicago conventional and reformulated gasoline prices have hit their lowest values of the year. As a result of substantial discounts for heavy sour Canadian crude oil, these prices are expected to drop further.

The Thursday morning offer for Spot Chicago CBOB stands at a 21.25-cent discount to the NYMEX December RBOB contract. This implies a price of approximately $2.05 per gallon, which is around 2 cents lower than reformulated gasoline in the Midwest market.

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