Oil Futures End Down

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled mixed Tuesday afternoon with crude down and products giving back most of their earlier gains on concerns over a glut of supply and economic growth that could cut into energy demand. Worry over economic growth also pressured the broader market.

"There was some short-covering early in the morning but as soon as the stock market fell, oil prices sold off," said analyst Phil Flynn at Price Futures Group in Chicago.

The downside reversal for the complex comes ahead of weekly oil supply data due out at 4:30 p.m. EDT from the American Petroleum Institute and from the Energy Information Administration at 10:30 a.m. EDT Wednesday.

"Expectations that U.S. inventories declined last week prompted some likely profit taking off previously established short positions," said analyst Tim Evans at Citi Futures in New York. "Buying interest in September WTI at the $40 psychological level may have also helped support prices, at least for now."

NYMEX September West Texas Intermediate crude futures tested technical support at $38.86 with a $39.26 trade before settling below the psychologically important $40 bbl for the first time since April, down 55cts at $39.51 bbl.

The downside was curbed by a weaker dollar. The dollar slipped to a five-week low after Japan unveiled a smaller-than-expected $28 billion fiscal stimulus that investors think won't be enough to jumpstart economic growth and ultimately energy demand.

On the IntercontinentalExchange, the October Brent crude contract declined 34cts to $41.80 bbl after posting a $41.51 3-1/2 month spot low.

In products trade, NYMEX September ULSD futures edged up 0.11cts to $1.2590 gallon, reversing off a $1.2466 3-1/2 month spot low, while September RBOB futures nudged up 0.80cts to $1.3116 gallon.

On Wall Street, equities tumbled more than 0.5% across the broad on risk-off trade, with the dollar also down versus a basket of six rival currencies. The dollar weakness limited oil futures' downside.

A Schneider Electric survey of analysts shows an expected crude stock draw of up to 1.5 million bbl for the week-ended July 29, with distillate fuel stocks seen down as 1.0 million bbl and gasoline stockpiles seen down 500,000 bbl.

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