NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled lower Tuesday afternoon after the crude and ULSD contracts gave up early gains, falling to two-week lows across the board. The U.S. dollar rallied to a three-week high and crude oil supply disruptions were minimal due to a storm in the Gulf of Mexico.
Worries about a glut of supply added to the selling pressure since domestic crude supply remains high near the end of the summer, and demand is expected to ease further after Labor Day. The market awaits oil inventory data for the week-ended Aug. 26, which is expected to show small draws of 300,000 bbl and 500,000 bbl for crude and gasoline, respectively, a survey by Schneider Electric showed this morning.
The American Petroleum Institute will release its data at 4:30 p.m. EDT while the Energy Information Administration will issue its data at 10:30 a.m. EDT Wednesday.
The dollar surged after new data showed consumer confidence increased to an 11-month high while the market is optimistic about the labor market. Earlier, Federal Reserve Vice Chair Stanley Fischer gave an upbeat view of the U.S. economy and signaled an interest rate hike could come before the end of the year.
Fischer said in a Bloomberg television interview that the U.S. labor market is close to full-employment and the pace of rate increases will depend on how well the economy performs.
"Oil prices reversed lower when the dollar rose immediately after we saw a big jump in consumer confidence, but the prices have since come off their lows because of production shut-downs due to the storm," said analyst Phil Flynn at Price Futures Group in Chicago.
At settlement, NYMEX October WTI crude futures were down 63cts at $46.35 bbl, off a two-week spot low of $46.21.
ICE October Brent contract settled 89cts lower at $48.37 bbl, near a two-week low of $48.23, with the October contract expiring on Wednesday. The November Brent contract was down 72cts at $48.73.
NYMEX September ULSD futures settled down 1.51cts to $1.4711 gallon, off a two-week low of $1.4620, with the contract set to expire Wednesday. The October ULSD contract was down 1.60cts at $1.4847 at settlement.
NYMEX September RBOB futures fell 1.86cts to a $1.4483 gallon settlement, off a two-week low of $1.4334 ahead of its expiry on Wednesday, with the October contract down 2.13cts at $1.3745.
The National Hurricane Center said Tropical Depression Nine moving in the southeast Gulf of Mexico may strengthen and cause flooding before making landfall later this week.
The Bureau of Safety and Environmental Enforcement said that as of today, personnel have been evacuated from nine production platforms in the Gulf of Mexico, equivalent to 1.2% of the 750 manned platforms in the Gulf as a precaution. One offshore rig has had its personnel evacuated, which is 9% of the 11 rigs currently operating in the Gulf.
Oil futures also came under pressure from growing doubts the Organization of Petroleum Exporting Countries will agree to freeze or cut production at their informal meeting next month in Algeria.
The doubts persisted even after Iraq's Prime Minister Haider al-Abadi said Iraq would support OPEC's efforts to stabilize oil prices. Iraq is one of the countries that have been increasing production in recent months, and Al-Abadi's comment was offset by another Bloomberg report saying Iran plants to boost its production by 200,000 bpd by the end of the year after producing 3.6 million bpd in July.
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