Oil Mixed in Tuesday Morning Trade

NEW YORK (DTN) -- New York Mercantile Exchange oil futures were mixed in morning trade, with West Texas Intermediate crude reversing off a $49.77 bbl fresh 3-1/2 month low on the spot continuation chart ahead of the August contract’s expiration Tuesday afternoon. August ULSD futures were higher after trading at a nearly six-month spot low of $1.6422 Monday, with the August RBOB contract lower.

The market remains choppy, analysts said, with investors taking a close look at technical indicators, U.S. dollar gyrations and market supply conditions.

The dollar weakened this morning after trading Monday at a three-month high versus a basket of six major currencies on the prospect the Federal Reserve would raise the federal funds rate this year as the U.S. economy continues to improve. A stronger dollar is bearish for domestic oil prices.

Commodities traders have relied on the Fed's easy money policy, so a rate hike this year is seen reducing some of the market’s liquidity that, in turn, has dampened investor enthusiasm, analysts said.

At 8 a.m. CDT, the NYMEX August WTI crude contract rose 20 cents to $50.35 bbl, straddling on either side of the $50.00 bbl psychological support point so far this week. September WTI crude futures were up 24 cents at $50.68 bbl.

On the IntercontinentalExchange, the September Brent crude contract rose 22 cents to $56.87 bbl. September Brent crude is holding a $6.19 bbl premium over the September WTI contract.

In products trade, the NYMEX August ULSD contract edged up 0.83 cents to $1.6667 gallon while the NYMEX August RBOB contract eased 1.30 cents to $1.9173 gallon.

An early survey of analysts show domestic crude oil stocks are expected to have been drawn down by 2.8 million bbl during the week ended July 17, including a 700,000 bbl stock draw at Cushing, the supply hub that also serves as the delivery point for NYMEX WTI futures.

The survey also showed distillate fuel stockpiles are expected to have increased by 2.5 million bbl, with gasoline supplies seen up 800,000 bbl for the week reviewed.

The United Nations Security Council on Monday approved the nuclear deal Iran reached on July 14 with six world powers, but delayed implementation until after a vote by the U.S. Congress in October. Once implemented, Iran would win relief from sanctions, including restrictions on its crude exports.

Iran is expected to boost its crude exports by as much as 1.0 million bpd to 2.4 million bpd by next year once the deal is implemented and sanctions are lifted. Iran said it could boost oil production to 4.0 million bpd in six to seven months from 2.8 million bpd in June and 3.7 million bpd in 2011 before the sanctions were imposed.

The extra supply from Iran would come to the market at a time China's economy is slowing while the European recovery is undermined by the Greek debt crisis, raising fresh questions about global demand after this summer.

George Orwel can be reached at george.orwel@telventdtn.com