Oil Futures Open Higher on Supply

Oil Futures Open Higher on Supply

NEW YORK (DTN) -- New York Mercantile Exchange oil futures opened mostly higher Wednesday morning on risk-on trade as fears ease over last week's vote by Britain to leave the European Union while a potential oil workers' strike in Norway and supply disruptions in Venezuela and Nigeria added support to the futures complex.

The gains have also been bolstered by positive U.S. economic data, the weakening dollar, and weekly data by the American Petroleum Institute released late Tuesday showing unexpected draws in U.S. crude oil and oil product inventories.

The market now awaits weekly oil inventory data from the Energy Information Administration due out at 10:30 AM ET.

At 9:00 a.m. EDT, NYMEX August West Texas Intermediate crude oil futures were up 41 cents at $48.28 per barrel (bbl), off a three-day high of $48.58, and August Brent on the IntercontinentalExchange rose 26 cents to a $48.86 bbl open.

In products trade, NYMEX July ULSD futures gained 1.42 cents to $1.4853 gallon at open, off a three-day high of $1.4911, while July RBOB futures eased 0.21 cents to $1.5079 gallon, reversed down after posting a three-day high of $1.5220. RBOB has since reversed higher at last look.

On Wall Street, U.S. stock indices rallied 0.7% on risk-on trade with the Dow Jones Industrial Average up 132 points, as analysts said the selloff linked to Brexit was overdone and the impact of the British referendum to the global economy is not cataclysmic.

On the economic front, the Commerce Department said U.S. consumer spending rose 0.4% in May after a 1.1% advance in April, which was revised higher this morning. Personal income rose 0.2% versus expected 0.3% in May.

In Beijing, the People's Bank of China intervened to support and stabilize the yuan. In currency trade, the pound sterling rose 1.0% versus the dollar and the euro rose 0.35% while the dollar fell 0.5% versus six key currencies including the euro, the pound, the yen and the yuan.

On the supply side, a looming strike by Norwegian oil workers threatens to cut output from the biggest North Sea producer. The workers' union has called for work stoppage effective Saturday, July 2, if their demand for a new wage deal is not met by July 1 midnight.

A strike in Norway would add to ongoing disruptions in Nigeria and Venezuela. Nigerian oil supply is down to 1.9 million bpd, battered by frequent militant attacks, while Venezuela is struggling to keep output up due to power outages and equipment shortages.

Domestically, API reported late Tuesday that commercial crude oil inventories were drawn down 3.86 million bbl in the week-ended June 24, surpassing a 2.7 million bbl decline expected in a DTN survey.

At the Cushing, Okla., delivery location for NYMEX WTI crude, supply fell by 1.21 million bbl. API reported a 416,000 bbl gasoline stock draw and an 832,000 bbl decline in middle distillates versus consensus expectations for little week-over-week change.

EIA data is expected to show demand for petroleum continuing to improve as the summer peak driving season gets underway.

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