NEW YORK (DTN) -- New York Mercantile Exchange oil futures opened lower Wednesday morning on bearish industry data showing a surprise increase in weekly crude oil inventories in the United States and signs the current global supply overhang may not begin to ease near term.
A stronger dollar also added downward pressure on oil prices, with the greenback gaining against the euro amid growing concerns Tuesday’s Greek debt default could have a negative impact not only in Greece but also throughout Europe.
The market appears to be uncertain about Greece after Prime Minister Alexis Tsipras showed signs of backing down on his standoff with creditors, though the creditors said his turnaround is too little, too late.
“It seems that after 24 hours of economic collapse, Greece now says it is ready to accept the bailout conditions it previously rejected,” said analyst Phil Flynn at Price Futures Group, adding economic woes from the Greek crisis would undermine oil demand.
At 8 a.m. CDT, the NYMEX August WTI contract opened down 77 cents at $58.70 bbl while ICE August Brent futures were down 51 cents at $63.08 bbl. The Brent premium over WTI expanded 24 cents to $4.36 bbl at the open.
In products trade, the NYMEX August ULSD contract fell 1.60 cents to $1.8739 gal while NYMEX August RBOB contract dropped 2.33 cents to $2.0261 gal at the open.
The American Petroleum Institute, a trade group, late Tuesday reported a 1.9 million bbl crude stock build for the week ended June 26 vs. forecasts for an average draw of 2.0 million bbl.
API also reported gasoline and distillate fuel stock builds of 300,000 bbl each, while the market expected average increases of 2.0 million bbl and 1.8 million bbl, respectively.
The Energy Information Administration will issue its closely watched weekly oil supply report at 9:30 a.m. CDT. The report will be scrutinized for its U.S. oil production estimate.
Overseas, Libyan oil exports are seen surpassing 500,000 bpd in the second half of 2015 due to an improvement in security measures, according to Eurasia Group.
Also, Iranian nuclear talks in Vienna were extended for a week as diplomats struggled to reach a permanent agreement that eventually would result in the lifting of sanctions on Iran and allow Tehran to increase its oil exports.
Iran production averaged 3.4 million bpd in 2014 and the sanctions have cut its exports by 1.0 million bpd, according to EIA, which averaged 1.4 million bpd last year.
On Wall Street, U.S. equities were higher on U.S. economic optimism, with payroll firm ADP Wednesday morning reporting that 237,000 private sector jobs were created in June, more than an expected 218,000. The Labor Department’s jobs report for June will be issued Thursday.
Data issued Tuesday showed a rise for home prices, manufacturing and consumer confidence.
President Barack Obama said the Greek crisis impact on the U.S. economy would be limited, while Federal Reserve Vice Chairman Stanley Fisher said the economy is close to full-employment. A strong U.S. economy supports oil demand.
The market is monitoring the Greek debt default. The International Monetary Fund confirmed Greece was in arrears after failing to make a scheduled $1.8 billion debt payment. Greece is the first developed nation to default on its debt to the IMF.
Prime Minister Tsipras said overnight that he would accept the bailout proposal offered by creditors on June 28 if some conditions are changed, backing down from a standoff that's pushing the nation's banking system toward collapse.
But the creditors expressed skepticism, with Germany saying serious talks were possible only after the July 5 Greek referendum. There’s little trust between the Tsipras government and the creditors after five months of brinkmanship.
An initial poll conducted by a pro-Tsipras newspaper showed support for his stance, but the polls are now slowing moving against him as banks remained closed for the third straight day, and it’s not clear if the vote would be allowed to proceed if Tsipras realizes he might lose, according to reports by Bloomberg News and NBC News.
The Fourth of July holiday will cut this week's trading short, with most markets closed on Friday.
George Orwel can be reached at firstname.lastname@example.org
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