DTN Oil

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled Monday's session flat to higher ahead of inflation data scheduled for Tuesday morning, with the U.S. dollar strengthening on the session.

The U.S. consumer price index is expected to have increased 0.1% from January to 0.4% in February, while unchanged on an annual basis at 3.1%, with the Bureau of Labor Statistics set to release the inflation indicator at 8:30 AM ET Tuesday. The anticipated uptick in the inflation indicator sustained expectations that the beginning of an interest rate-cutting cycle by the Federal Reserve won't start until June. The federal funds rate is currently in a 5.25%-5.5% target range. The Federal Open Market Committee meets next on March 19-20.

The U.S. dollar strengthened 0.16% in trading against a basket of foreign currencies to 102.852, reversing higher from Friday's 102.3 eight-week low.

The modestly stronger dollar joined building crude inventory in holding back gains for April West Texas Intermediate futures, with the contract settling down $0.08 at $77.93 bbl, just below the $77.97 bbl 200-day moving average on the spot continuous chart. ICE May Brent settled Monday's session up $0.13 at $82.21 bbl, also slipping below the spot continuous 200-day moving average at $82.50 bbl.

The flat session for the benchmark crude contracts is realized ahead of monthly forecasts for the disposition of world oil supply and demand beginning Tuesday morning with the Organization of the Petroleum Exporting Countries Monthly Oil Market Report followed by the lunchtime release of the Energy Information Administration's Short-term Energy Outlook. Sluggish economic growth by China so far this year is seen limiting demand while extended production cuts by OPEC+ are expected to tighten the global market in the short term.

U.S. crude stocks have increased 27.852 million bbl or 6.6% since the middle of January, EIA data shows, with the seasonal build amplified by extended refinery maintenance programs and unplanned refinery outages, namely bp's 440,000 bpd Whiting refinery in northern Indiana. A lower refinery utilization rate triggered drawdowns in product inventories, with gasoline stocks on March 1 at a 239.745 million bbl 2024 low, according to EIA, 3.7 million bbl below the five-year average.

April RBOB futures settled $0.0533 higher at a $2.5805 gallon five-day high.

April ULSD futures reversed higher off a $2.5883 nine-week low on the spot continuous chart Monday to settle with a $0.0109 gain at $2.6518 gallon. Despite a 17.743 million bbl or 13.2% drawdown on national distillate fuel inventory since mid-January, pressing stocks 5.2 million bbl below the comparable week a year ago at 117.01 million bbl, the ULSD contract has been pressured by tepid demand. EIA shows cumulative demand during the first two months of 2024 down 61,000 bpd or 1.6% against the comparable two-month period in 2023. There are signs of a recovery in U.S. freight demand, which improved in February.

"Real disposable incomes slowed to start 2024, but goods prices are now declining overall, and with the ongoing strong labor market, freight demand fundamentals are improving," said Tim Denoyer, vice president with ACT Research.

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