NEW YORK (DTN) -- New York Mercantile Exchange oil futures turned mixed at the start of regular trade Wednesday morning ahead of a weekly government report that's expected to show stock draws for domestic crude oil and gasoline inventories for the week-ended July 22 while distillate fuel supply is seen unchanged.
The futures complex sunk to multi-month lows on Tuesday on supply concerns before paring the declines to end mixed. The market now awaits the Energy Information Administration's weekly report on supply due out at 10:30 AM ET.
Late Tuesday, the American Petroleum Institute issued data showing U.S. oil stocks declined less than expected last week, exacerbating concern over a persistent supply glut that was projected to begin easing during the second half of 2016.
API reported domestic crude oil supply was drawn down 827,000 bbl during the week-ended July 22 while analysts expected inventories to decline by 3.0 million bbl. Crude oil stocks in Cushing, Oklahoma, increased by 1.4 million bbl, while the market expected to see a draw of 500,000 bbl. For products, the data showed a 423,000 bbl gasoline stock draw for the week reviewed versus an expected 800,000 bbl decline. Distillate fuel inventories increased 292,000 bbl last week while analysts expected supplies of the fuel to hold steady at the prior week's level.
At last look, NYMEX September West Texas Intermediate crude oil futures edged up 2cts at $42.92 bbl while September Brent on the IntercontinentalExchange was 26cts lower at $44.61 bbl. In products trade, NYMEX August ULSD futures eased 0.18cts to $1.3242 gallon while August RBOB futures were up 1.06cts at $1.3558 gallon.
Analysts said they expect the downside pressure on oil prices to continue in the short-term, as global oil demand is not as strong as expected, while oil product inventory continues to build in the United States. Oil supply is increasingly being stored offshore in tankers in what is known as floating storage.
Although crude oil supply in the U.S. has been drawn down for nine weeks straight, the inventory of U.S. oil products has continued to grow, with gasoline supply increasing during the first half of July despite strong seasonal driving demand.
On Wall Street, U.S. equities were higher on risk-on trade while the dollar rose. A stronger U.S. dollar also added to the downside pressure on oil futures, with the greenback trading at a 4-1/2 month high on Monday.
The dollar strength comes ahead of the Federal Open Market Committee's announcement at 2:00 PM ET of its decision on interest rates. The market widely expects no rate hike, setting their outlook for an increase in the benchmark interest rate in December, but the central bank could offer a hopeful view of the domestic economy in general.
George Orwel can be reached at email@example.com
© Copyright 2016 DTN/The Progressive Farmer. All rights reserved.