Oil Closes Mixed Tuesday

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled shallowly mixed Tuesday afternoon, with crude posting a better than three-month low on growing concerns about excess supply while RBOB and ULSD futures reversed higher from overnight losses ahead of Tuesday afternoon's expiration of August products options contracts.

After the 2:30 PM ET close of regular trade, the market focused on weekly oil supply data that's expected to show stock draws for crude oil and gasoline, while distillate fuel supplies are seen holding steady.

The American Petroleum Institute is set to release its supply report for the week-ended July 22 to paying customers at 4:30 PM ET while the Energy Information Administration will issue its report at 10:30 AM ET Wednesday.

A survey earlier today projected a 3.0 million bbl crude oil stock draw and an 800,000 bbl gasoline stock build while supply of distillates are seen holding steady for the week reviewed.

NYMEX September West Texas Intermediate crude oil futures settled down 21cts at $42.92 bbl, off a $42.36 better than three-month low on the spot continuation chart.

September Brent on the IntercontinentalExchange settled 15cts higher at $44.87 bbl, reversing off a $44.14 fresh 2-1/2 month spot low.

In products trade, NYMEX August ULSD futures settled 0.32cts higher at $1.3260 gallon, near a fresh 2-1/2 month spot low of $1.3118. August RBOB futures were up 1.16cts to $1.3452 gallon at settlement, off a fresh five-month spot low of $1.3093.

Market sentiment turned bearish in July after early year expectations that strong demand amid low oil prices and improving economic growth would overtake new supply and work down a global inventory glut that rebalanced the market in the second half of the year are not panning out.

Analysts said the market rebalancing is likely delayed until next year, as global oil demand is not as strong as expected, while oil product inventory continues to build in the United States. Oil supply is also increasingly being stored offshore in tankers.

Although crude oil supply in the United States has been drawn down for nine weeks straight, the inventory of U.S. oil products continues to grow, with gasoline supply increasing during the first half of July despite strong seasonal driving demand.

Earlier this morning, BP CEO Bill Dudley said although oversupply of gasoline is weighing on oil prices and pressurizing refining margins, crude oil market fundamentals would tighten going into 2017.

In currency trade, the U.S. dollar, which rallied to a 4-1/2 month high on Monday (7/25), eased today, tempering the decline in WTI futures.

The weaker dollar comes with today's start of the Federal Open Market Committee's two-day meeting. FOMC officials will discuss the health of the U.S. economy and whether to adjust the federal funds rate. The market widely expects no rate hike to be announced Wednesday, with most analysts anticipating a hike in December.

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