Oil Futures Climb on Greek Hope

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended higher on Tuesday afternoon, rebounding from Monday's sell-off and rallying on forecasts for a ninth weekly domestic crude stock draw, United States economic optimism and hopes for an eleventh-hour deal between Greece and its creditors to avert a looming debt default tonight by Athens.

The NYMEX August WTI contract settled up $1.14 at $59.47 bbl after rebounding off a three-week spot low of $57.94 and rallying to a two-day high at $59.69. ICE August Brent futures settled $1.58 higher at $63.59 bbl, off a four-day high at $63.83. The Brent premium over WTI expanded 44cts to $4.12 bbl at the close.

In products trade, the NYMEX July ULSD futures contract rallied 5.0cts to $1.8866 gal, where it expired after posting a four-day high of $1.8952. The August ULSD contract settled 4.63cts higher at $1.8899 gal. NYMEX July RBOB futures spiked 5.93cts to $2.0896 gal where it expired, near a four-day high of $2.0968 posted earlier. The August RBOB contract settled up 4.61cts at $2.0494 gal.

Greek Finance Minister Yani Varoufakis this morning confirmed Athens will not pay the $1.8 billion debt due to the International Monetary Fund at 6 p.m. EDT, but Greek officials are still working around the clock to keep afloat financially.

Greece made a request for a third bailout from its creditors in an attempt to secure the country's solvency hours before today's deadline for the IMF loan payment, but the proposal doesn't include reforms demanded by creditors. The creditors plan to meet tonight to discuss the Greek proposal.

Prime Minister Alexis Tsipras' office told reporters he has proposed a two-year agreement with a Eurozone bailout fund known as the European Stability Mechanism. European officials said a new bailout program was still possible, but it would require Tsipras to accept tax and pension reforms he has so far resisted.

The Greek government is also considering a new sweetened offer from Jean-Claude Juncker, president of the European Commission, who early this morning proposed favorable bailout terms including reducing by half the 23% value added tax proposed last week.

Greek banks remain closed for the second day, but the slight glimmer of hope that Greece could avoid a default that could hurt the economy and oil demand prompted a short-covering rally today.

At the same time, the White House expressed confidence a final nuclear deal will be reached with Iran in the coming days after diplomats extended their self-imposed deadline by seven days from today to allow them more time to negotiate.

The parties still differ on two sticky issues: the U.S. insists Iran must allow inspectors unfettered access to nuclear sites and Western sanctions on Iran would be eased gradually rather than at once when the deal is signed next week as Tehran wants.

The International Atomic Energy Agency also said Iran has significantly reduced its nuclear program as part of the interim agreement with Western powers three months ago. That pact will expire when the final deal is signed in early July. Still, diplomats suggested Iranian crude oil exports won't be able to increase until early 2016.

On supply, a survey by Schneider Electric shows the market expects crude oil inventories to have been drawn down 200,000 bbl for the week-ended June 26, while gasoline stocks are expected to have increased by 2.0 million bbl and distillate supplies are seen up 1.0 million bbl.

The second quarter closed today and book-squaring dominated trading direction. The July 4th holiday will cut this week's trading short, with most markets closed on Friday (7/3).

On Wall Street, U.S. equities were higher as calm returned to the market not only on hopes about Greece, but also on U.S. economic optimism. Case-Schiller composite home price index rose in April, Chicago manufacturing also climbed in June. Separately, the Conference Board said consumer confidence spiked to 101.4 in June from 94.6 in May and above estimates at 97.3.

Also, President Barack Obama said the Greek crisis won't be a major shock to the U.S. economy, while Federal Reserve Vice Chairman Stanley Fisher said the U.S. economy is close to full-employment. A strong U.S. economy supports oil demand.