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 
mobility.

   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 
the week.

   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 
markets.

   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 
tightened.

   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, liubov.georges@dtn.com, http://www.dtn.com.

    




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