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Crude oil futures move lower as market reevaluates US stock build; ICE Brent down to $85.56/b, NYMEX WTI $75.41/b

New York — Oil futures trended lower in mid-morning trading Thursday as global supply concerns eased and the market reevaluated the impact of US inventory builds.

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ICE December Brent slid 73 cents to $85.56/b, while NYMEX November WTI dropped $1 to $75.41/b.

The market shrugged off news of a large build in US inventories last week to move higher Wednesday on ongoing concerns regarding the impact of US sanctions on Iran. But Thursday, comments from Saudi oil minister Khalid al-Falih that Saudi Arabia has ample spare production capacity calmed markets.

Saudi Arabia is currently producing 10.7 million b/d, and has roughly 1.3 million b/d of spare capacity, Falih said at the Russia Energy Week forum in Moscow.

Falih blamed the recent run-up in oil prices on geopolitical tensions and speculators. OPEC has been increasing its oil production since June and inventories are rising counter-cyclically, he added.

But despite Thursday's downturn, overall crude prices remain strong as the fundamental supply picture remains tight long term. The US crude build last week was largely resulted from a sharp decline in exports, which dipped to a four-week low 1.72 million b/d last week, according to US Energy Information Administration data. But analysts highlighted continued strong demand for crude and products and described the export decline as a temporary dip.

"Strong product demand in gasoline and distillate offset concerns of the supply increase that was mainly caused by a sharp drop in US oil exports," Price Futures Group senior market analyst Phil Flynn said in a morning note. "The market realizes that when we see a sharp drop in US oil exports in one week, it usually rebounds hard the next week," he added.

Indeed, a strong Brent/WTI spread could encourage more exports going forward. Outsized declines in WTI futures relative to international grades moved its discount to Brent to the widest point in four weeks Thursday. The ICE Brent/WTI spread rose to $10.32/b early in the session, the widest intraday premium since September 10. With levels later holding around $10.20/b, the ICE Brent/WTI spread was on pace Thursday to close at its highest level since June.

NYMEX November ULSD dipped 2.14 cents to $2.4158/gal, while NYMEX November RBOB slid 2.16 cents to $2.1162/gal.

--Chris van Moessner, christopher.vanmoessner@spglobal.com

--Edited by Valarie Jackson, valerie.jackson@spglobal.com