DTN Oil

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange nearest delivery ended shallowly mixed, consolidating within Tuesday's trade range as investors compared contrasting signals as they look for a path to recovery, while the Federal Reserve pledged continued support for the economy as it contends with the fallout from the COVID-19 pandemic.

Weekly inventory data released at midmorning was supportive in that it showed products draws and a build in domestic commercial crude stocks that was well below what the American Petroleum Institute reported Tuesday afternoon, yet gasoline demand slowed modestly and total U.S. commercial oil inventory increased 7.1 million barrels (bbl) to a 1.447 billion bbl fresh record high, 12.4% above the 5-year average. Since U.S. President Donald Trump declared the COVID-19 pandemic a national emergency on March 13, total commercial supply of crude and oil products increased 183.4 million bbl or 14.5%, data from the Energy Information Administration shows.

In a second day of testimony before Congress, Federal Reserve Chairman Jerome Powell said the central bank will continue to support the U.S. economy through near-zero interest rates and accommodative monetary policy. Powell told the U.S. House of Representatives Committee on Financial Services the Fed would not prematurely withdraw any of the emergency measures undertaken to contend with the pandemic in delivering his Semiannual Monetary Policy Report, adding the country is in the early stages of an economy recovery that would continue if the virus remains under control.

On the same day Powell made his comments, The Hill reported Florida, Texas, and Arizona recorded their highest single day new cases of COVID-19 at 2,783, 4,098, and 2,292, respectively. Earlier reports indicated China is contending with a breakout in Beijing, now in its seventh day after no new cases were reported since February, which might lead to a lockdown of the capital.

Gasoline supplied to the U.S. market eased by 31,000 barrels per day (bpd) to 7.87 million bpd during the week ended June 12, according to the EIA although inventory was drawn down 1.7 million bbl to 257 million bbl. That lent enough support for NYMEX July RBOB futures to settle up $0.0080 at $1.2153 gallon, the highest point on the spot continuous chart since March 6, a day before the five-week Saudi-Russian volume war began.

Implied distillate demand rose for a second week, up 252,000 bpd to 3.555 million bpd, although is down 20.2% during the four weeks ended June 12 against the comparable year-ago period. NYMEX July ULSD futures ended flat, down two points from a three-month spot high at $1.1820 gallon.

The crude contracts eased slightly amid inside trade ahead of Thursday's Joint Ministerial Monitoring Committee meeting, with Saudi Arabia and Russia insisting on strong compliance by OPEC+ members in meeting their lowered production quotas. On April 12, OPEC+ reached an agreement curtailing 9.7 million bpd in output during May and June and extended the cut through July in early June before it tapers down to 7.7 million bpd for the remainder of 2020. Noncompliance by Iraq and Nigeria drew the ire of Riyadh and Moscow, with the two countries agreeing to make up for the missed cuts in July, August and September.

OPEC this morning released production data showing the cartel cut output a steep 6.3 million bpd to 24.195 million bpd in May as their April agreement took effect, realizing compliance of 91%. Iraq crude production fell 340,000 bpd to 4.165 million bpd, well above a 3.592 million bpd quota. Nigeria's output of 1.592 million bpd in May was down 185,000 bpd from April, but above a 1.412 million bpd quota.

The market will also focus on the latest employment data, with the Department of Labor scheduled to release weekly initial filings for unemployment insurance 8:30 a.m. EDT Thursday. Expectations are for 1.22 million first-time filings occurred during the week ended June 13, down 322,000 from the previous week.

Brian L. Milne can be reached at brian.milne@dtn.com

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