Oil Futures Mixed as Traders Eye API, USD Hit 9wks High
WASHINGTON, D.C. (DTN) -- After trading in narrow ranges for most of the
session, nearby delivered oil futures on the New York Mercantile Exchange and
Brent crude on the Intercontinental Exchange settled mixed on Tuesday, with the
West Texas Intermediate October contract expiring below $40 bbl as traders look
toward an expected bearish U.S. inventory report for the week-ended Sept. 18th
and a sudden spike in coronavirus cases across European economies that have
triggered some tightening of quarantine measures and new restrictions on
Tuesday afternoon, traders positioned ahead of the weekly release of U.S.
inventory data from the American Petroleum Institute due out 4:30 PM ET to be
followed by official statistics from the U.S. Energy Information Administration
on Wednesday. Market watchers mostly expect a bearish report, with combined
crude and refined product inventories seen to have increased last week. Crude
oil stocks are estimated to have declined by 1 million bbl, while gasoline
stocks likely increased 500,000 bbl and distillate supplies by 1 million bbl on
Bloated distillate inventories have been a growing challenge for domestic
refiners that restrained crude throughputs to 13.5 million bpd during the
week-ended Sept. 11, 3 million bpd or 18% below the five-year average in an
effort to minimize production of distillate fuels. U.S. distillate supplies
remain far above the five-year average at 179 million bbl -- the highest level
since 1982. With global air travel unlikely to recover anytime soon, high
distillate inventory will remain a bearish factor for the U.S. and global oil
Expanded mobility restrictions in Europe is the latest bearish news for
distillates, where transportation fuel consumption is heavier for diesel, while
occurring during the fall months -- a time when the coronavirus pandemic is
expected to worsen.
In Northwest Europe, British Prime Minister Boris Johnson announced Tuesday
new quarantine measures for the first time since March to halt the recent spike
in coronavirus cases. Although new measures stop short of the lockdown, UK
health officials note should the trajectory of the virus worsen, they could be
High-frequency traffic data from Apple Inc. already shows the request for
driving directions fell sharply in some of Europe's major economies, including
the United Kingdom. Consensus for Eurozone's Purchasing Manufacturing Index for
September due for release overnight calls for a slight dip in economic activity
from the prior month.
Domestically, Federal Reserve Chairman Jerome Powell Tuesday reassured
elected officials the economy remains resilient even with a broader spread of
the virus and the expiration of CARES Act provisions. Earlier this month,
Federal Open Market Committee upgraded their 2020 economic projections,
forecasting gross domestic production to contract at a softer pace of 3.7%
compared with a 6.5% contraction expected in June, with the U.S. unemployment
rate projected at 7.6% by year's end. Powell noted, however, most FOMC
participants assumed some additional fiscal action in their forecasts.
The U.S. dollar index marched above 94 in afternoon trade Tuesday to a 94.12
nine-week high, as risk aversion across global markets prompted a flight to the
safety of the currency.
NYMEX October WTI expired 29cts higher at $39.60 bbl, with November WTI
futures settling below $40 bbl at $39.80 bbl. The international crude benchmark
Brent contract with November delivery gained 28cts to settle at $41.72 bbl,
with the December contract holding a $0.47 premium to November. NYMEX October
ULSD futures declined 1.12cts to $1.0961 gallon, and front-month RBOB futures
dropped 1.28cts to $1.1643 gallon.
Liubov Georges, 1.646.359.4088, firstname.lastname@example.org, http://www.dtn.com
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