Oil Mixed in Early Tuesday Trade

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange and Brent crude on the IntercontinentalExchange moved mixed early Tuesday in kicking off a truncated week of trading following the Memorial Day holiday, and in front of contract expirations for June RBOB, June ULSD and July Brent this afternoon. Oil futures are consolidating within last week's trade range, with all the contracts rallying to multi-week highs last week.

At 9:00 AM ET, July West Texas Intermediate was up 16cts at $49.49 bbl, holding a modest premium over the expiring ICE July Brent contract, which was down 34cts at $49.42 bbl. ICE August Brent crude futures were down 28cts at $50.08 bbl. For oil products, NYMEX June RBOB futures were down 1.49cts at $1.6170 gallon with the July contract 1.19cts lower at $1.6259 gallon. June ULSD futures were up 0.65cts at $1.5005 gallon with July delivery 0.26cts higher at $1.5041. The limited price action also comes alongside a stronger U.S. dollar, which got a boost on bullish data on housing and personal spending.

The Bureau of Economic Analysis this morning reported consumer spending rose 1.0% in April, the largest monthly gain in nearly seven years and more than an expected 0.7% increase. Also, the S&P/Case-Shiller National Home Price Index gained 5.4% in March, matching expectations, and following a 5.3% annual gain in February. Additional data points on manufacturing and employment are due out later in the week with the Department of Labor's nonfarm payroll report due out Friday morning, coming in front of the Federal Reserve's mid-June meeting when officials will discuss the economy and interest rates. U.S. employment has steadily improved in 2016, with the Labor Department seen as likely reporting a 155,000 increase in job gains in May, impacted by the just resolved worker's strike at Verizon. A strong reading would increase the likelihood officials would boost the federal funds rate when they meet June 14-15, with Fed Chair Janet Yellen on Friday (5/27) saying an increase in the overnight borrowing rate over the coming months would probably be appropriate. An increase in the federal funds rate would likely boost the dollar and pressure domestic oil prices, with oil trading globally in U.S. dollar denominations.

On Thursday, the Organization of the Petroleum Exporting Countries will meet in Vienna, although expectations for a coordinated cut in member production in an attempt to push global oil prices higher is not expected. OPEC abandoned their quota system in 2014, and Saudi Arabia has pursued a path in expanding its market share. The market will look for signs of discord among members, especially between Saudi Arabia and Iran, with the latter steadily increasing its production since the end of Western sanctions on its exports in January.

Brian L. Milne can be reached at brian.milne@dtn.com

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