Oil Moves Lower as USD Sprints Higher

NEW YORK (DTN) -- New York Mercantile Exchange oil futures moved lower as the dollar surged after China sought to restore calm in the market by expressing confidence in the yuan.

The NYMEX RBOB contract was the weakest segment of the oil complex a day after leading crude and ULSD futures higher after BP confirmed Wednesday a crude unit at its Whiting refinery in Indiana, will be idled for a month after a weekend shutdown.

Traders are weighing both fundamental and economic data issued this morning including U.S. retail sales that rose in July by a less-than-expected 0.6%, according to Commerce Department, while U.S. jobless claims unexpectedly rose 5,000 to 274,000 last week, according to the Labor Department.

At 8 a.m. CDT, NYMEX September West Texas Intermediate crude futures fell 45 cents to $42.85 bbl while ICE September Brent futures eased 14 cents to $49.52 bbl. The September Bent contract expires Friday, so traders are rebalancing their positions. The Brent premium over WTI rose 26 cents to $6.62 bbl.

In products trade, the NYMEX September ULSD futures contract eased 1.14 cents to $1.5755 gallon, while the September RBOB futures contract declined 2.65 cents to $1.7370 gallon.

On Wall Street, major U.S. stock indices were mixed this morning while the dollar bounced off a one-month low.

The greenback edged up while the yuan stabilized after China gave assurance, saying there was “no basis” for further yuan devaluation. The comment eased market concerns about the China’s economic health and boosted global equities earlier in the morning.

Technical indicators show the medium-term trend remains down for spot-month crude and oil products futures contracts, with WTI so far holding above major support at a low of $42.03 bbl, said DTN analyst Darin Newsom.

Traders are also weighing supply and demand fundamentals. The U.S. Energy Information Administration reported Wednesday that domestic crude oil and gasoline stocks were drawn down last week, bolstering sentiment that was initially fueled by the International Energy Agency's upside revision of its global oil demand outlook.

The EIA said domestic crude oil stocks fell 1.7 million bbl during the week ended Aug. 7. IEA said global oil demand in 2015 is expected to grow by 1.6 million bpd from a year ago, up 200,000 bpd versus its estimate published in July, and the fastest projected growth rate in five years.

Aside from fundamentals and the economic outlook, oil traders will also keep an eye on refinery outages that could impact physical supply in key markets of the country. The Whiting outage offers an example, with cash gasoline differentials spiking this week in the wake of the recent unit outage at the 405,000 bpd refinery.

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