Oil Mixed Ahead of Supply Data

NEW YORK (DTN) -- New York Mercantile Exchange oil futures moved mixed on Tuesday morning at the start of December trade after climbing overnight, led by a rally by the RBOB contract and a moderate advance in the crude oil segment of the complex.

The advance was driven by expectations of a draw in weekly domestic crude oil inventories, but the persistent glut in global supply and weak economic data from China are keeping the upside limited for refined products while pressing crude lower.

At 8 a.m. CT, NYMEX January West Texas Intermediate eased 41 cents to $41.24 barrel while the ICE January Brent contract fell 53 cents to $44.69 bbl. NYMEX January ULSD futures slipped 0.12 cents to $1.3530 gallon while January RBOB futures were holding to a 3.23 cents gain to $1.3392 gallon.

On Wall Street, U.S. stock indices moved 0.3% higher across the broad in a quiet trading day following mixed trade in Europe, while the dollar eased versus a basket of major currencies.

The focus for oil trade is on fundamentals and economic data. An early survey by Schneider Electric shows the market expects a 1.0 million bbl crude oil stock draw for the week-ended Nov. 27 as refiners are seen ramping up utilization by an estimated 1.0% to 93.0% of operable capacity.

The survey was mixed on products, but on average analysts expect stock builds of 300,000 bbl and 200,000 bbl for gasoline and distillates, respectively, but holiday travel and cold weather are seen boosting demand for gasoline and distillates.

The American Petroleum Institute will issue its data at 3:30 p.m. CT while the Energy Information Administration will release its report Wednesday morning.

Last week, Baker Hughes reported the total rig count in the United States dropped 13 to 744 during the week ended Nov. 25, with rigs in operation down 1,173 from a year ago. The next release of the U.S. rig count is due Friday.

Overseas, the Organization of Petroleum Exporting Countries is set to meet Friday in Vienna, but is unlikely to agree on a production cut to rebalance the market. OPEC already produces more than the agreed supply quota of 30 million barrels per day.

The current OPEC strategy is for each member to defend their market share. Saudi Arabia and Iraqi are pumping at capacity while Iran is expected to raise its output next year once sanctions on its oil industry are lifted pursuant to the July 14 nuclear agreement.

Meantime, demand is fragile and could be impacted by the economic slowdown in China. China’s manufacturing purchasing managers' index fell to 49.6 in November from 49.8 in October, the lowest reading since August 2012 and the fourth consecutive month below the benchmark level of 50. A reading above 50 shows an expansion in activity, while a figure below that level indicates a contraction.

The market is also looking ahead to the U.S. November payroll report due on Friday and the Federal Reserve is expected to increase the federal fund interest rate at a meeting mid-month.

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