Oil Futures End Lower on Profit-Taking

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended mixed this afternoon with the RBOB contract eking a modest gain after spending most of the session lower, while West Texas Intermediate and ULSD futures retreated from Monday's gains after a choppy session.

"The markets have turned lower on what looks like moderate volume profit taking off the recent rally as the U.S. dollar has firmed following its corresponding recent weakness," said Tim Evans, an energy specialist at Citi Futures.

The market had posted moderately steeper losses earlier in the session but pared the decline in late trade ahead of weekly U.S. oil inventory data due out at 4:30 p.m. EDT from the American Petroleum Institute.

The U.S. Energy Information Administration will release its oil data at 10:30 a.m. EDT Wednesday. The API and EIA reports are expected to show draws for crude oil and gasoline inventories and a modest build in distillate supply.

At settlement, NYMEX July WTI crude futures expired down 52 cents at $48.85 per barrel (bbl) while August WTI was down 11 cents at $49.85.

"So far, we are seeing somewhat greater weakness in July WTI, widening the July-August spread to a $0.72 contango," said Evans.

The August Brent crude contract on the IntercontinentalExchange was 3 cents down at $50.62 bbl, paring losses during market at close trade.

In products trade, NYMEX July ULSD futures fell 1.07 cents to a $1.5167 gallon settlement, while July RBOB futures reversed higher from a $1.5484 intraday low to settle up 1.02 cents at $1.5929 gallon.

"The API inventory report should give us a clue to supply and demand fundamentals, otherwise there's no strong trend for the market," said Tom Bentz, head of energy derivatives at ABN Amro. "The worry about whether Britain will exit the European Union is what has been driving the market up and down."

The odds of a British exit from the EU have been reduced following last week's killing of a popular parliamentarian that appears to have changed voter sentiment. The referendum is set for Thursday, June 23, with the optimism over Britain staying in the EU limiting the downside for oil futures after traders moved to book profits earlier in the day.

Concerns over an exit from the EU added to worries over economic growth last week and several central banks including the U.S. Federal Reserve reacted by leaving interest rates unchanged. Fed Chair Janet Yellen today told the Senate Banking Committee that a Brexit remains a risk to the economy, adding that she will tread carefully as she gauges when to lift interest rates.

Analysts said a rally on the back of polls was always going to be very tenuous, so the market is expected to remain volatile before the vote set for Thursday.

In currency trade, the dollar reversed up but remained near a two-week low because of the Brexit debate and ahead of Yellen's comments.

Meantime, there was some confusion about whether the Nigerian government had signed a 30-day ceasefire with militants whose attacks recently have curtailed the country's crude oil exports. The militants dismissed a report that such a deal was reached.

"If Nigeria has indeed reached a ceasefire agreement with militants in the Niger Delta it would open a possible window to complete pipeline repairs necessary to restoring output," said Evans.

A survey today estimate U.S. gasoline stocks posted a draw of 300,000 bbl during the week-ended June 17 and distillate stocks increased 200,000 bbl, with the forecast for crude stocks for a 1.7 million bbl stock draw.

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