Oil Mixed in Choppy Trade Tuesday

NEW YORK (DTN) -- New York Mercantile Exchange oil futures were mixed Tuesday morning as the market continues to seek direction in choppy trade, with traders eying China’s slowing growth and the prospect of more crude supply hitting the global market from Iran over the coming months.

The oil complex’s upside continues to be undermined by economic concerns and oversupply. However, a weaker dollar provides scant support while lower U.S. equities indicate risk-off trade.

At 8 a.m. CDT, NYMEX November West Texas Intermediate futures edged up 30 cents to $46.19 barrel after inside trade, with the November contract set to expire this afternoon at the regular close. The December WTI contract was up 24 cents at $46.52 bbl.

The December Brent crude futures contract was little changed versus Monday’s settlement, edging up 2cts to $48.63 bbl on the IntercontinentalExchange.

In products trade, NYMEX November ULSD futures extended lower, down 0.59 cents to $1.4431 gallon after posting a $1.4311 seven-week spot low. November RBOB futures bounced off Monday’s nine-month low, up 1.27 cents to $1.2641 gallon at the open of regular trade.

On Wall Street, U.S. stock markets moved lower while the dollar eased versus a basket of six world currencies, with hopes for a delay in a U.S. interest rate hike running high.

China on Monday reported its third quarter gross domestic product grew at the slowest growth rate since first quarter 2009 despite a raft of stimulus measure implemented this year. China's third quarter GDP at 6.9% surpassed estimates calling for 6.8% but fell short of the 7.0% growth rate for the first two quarters of this year. Economists believe China won't meet the 7.0% growth target for 2015 and the impact of slow growth is seen spreading globally.

Worries about China have hammered the oil market this year, exacerbating concerns about demand. China's robust growth underpinned higher oil prices in the past decade until last year when oversupply caused a precipitous decline in oil prices. That situation has continued as China's growth has slowed this year.

An early survey of analysts by Schneider Electric shows the market expects an average U.S. crude stock build of 3.3 million bbl for the week-ended Oct 16, with gasoline stocks expected to have declined 1.7 million bbl and distillate fuel stocks drawn down 2.0 million bbl.

Globally, the market is bracing for more oil supply from Iran, with Tehran saying it might be able to produce 3.4 million barrels per day within 6 to 7 months of sanctions being lifted, up from 2.8 million bpd in recent months. The July 14 nuclear deal between Iran and six world powers was officially adopted on Sunday under which Tehran agreed to make cuts in its nuclear programs in exchange for sanctions relief.

The Organization of Petroleum Exporting Countries is pumping more than its 30 million bbl oil production ceiling. OPEC output increased 109,000 bpd in September to 31.57 million bpd.

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