DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange settled lower Tuesday as investors turned their focus to U.S. crude inventories, with expectations for another build in already swelling supplies.

At settlement, NYMEX September West Texas Intermediate futures fell 56 cents to $41.04 barrel (bbl) and the international benchmark Brent crude contract shed 19 cents to $43.22 bbl. NYMEX ULSD August futures fell 1.20 cents to $1.2421 gallon and the front-month RBOB contract moved about 1 cent to $1.2656 gallon.

U.S. crude oil stocks are expected to increase by about 2.1 million bbl during the week ended July 24 with refinery runs forecast to increase marginally. Gasoline stocks likely decreased by 1.8 million bbl and distillate inventories likely dropped 1 million bbl on the week.

Participants continue to fret over the impact of COVID-19 on energy demand ahead of weekly petroleum supply data. The American Petroleum Institute will issue its weekly report Tuesday at 4:30 p.m. EDT with data from the Energy Information Administration due Wednesday morning.

The U.S. dollar is trading below the 94.0 level, its lowest since May 2018, continuing to boost investor appetite for risk assets, such as crude oil. With an upcoming Federal Open Market Committee meeting later Tuesday, where Federal Reserve chairman Jerome Powell is expected to express continued support for the Fed's dovish monetary policy, the decline in the U.S. dollar is likely to continue, keeping oil prices buoyant.

Meanwhile, U.S. Senate Majority Leader Mitch McConnell on Monday formally announced details of the newly proposed $1 trillion fiscal stimulus package, which will provide most Americans with a $1,200 stimulus check and cut enhanced weekly unemployment benefits by two-thirds, from the current $600 to about $200 a week, according to the news reports.

The government spending, while adding pressure on the U.S. dollar, is likely to boost consumer spending at a time when oil recovery outlooks appear to have stalled.

Goldman Sachs said this week the recovery in oil demand is slowing as COVID-19 infections continue to surge in the United States and elsewhere.

"Our Bottom-Up model further confirms the ongoing slowing of demand improvements, with a daily rate of demand gains of just 50 kb/d over the past three weeks, down 60% from the May-June pace of gains, bringing demand to c.10 mb/d below its pre-COVID path in mid-July," the investment bank said in a research report. "This slowdown is driven by a sharp stalling in the U.S. due to the resurgence of the virus, an only small increase in global jet demand and finally the headwinds to normalizing activity even in countries where the virus remains under control. After a 12.5 mb/d increase in demand levels from April to July, our Top-Down model leads us to forecast that the pace of monthly demand gains is set to slow to below 1 mb/d from August through December."

Liubov Georges can be reached at liubov.georges@dtn.com

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