Oil Futures End Higher Tuesday

NEW YORK (DTN) -- Spot-month New York Mercantile Exchange oil futures settled higher Tuesday afternoon after paring gains during market at close trade on expectations weekly reports due out later this afternoon and early Wednesday would show another increase in domestic crude oil inventories.

The market had rallied earlier in the session on a weaker dollar and high rate of compliance with production cuts being implemented by leading oil producing nations.

The dollar index plummeted to the lowest level since mid-November after President Donald Trump's trade advisor Peter Navarro told the Financial Times the euro was undervalued relative to Germany's trade balance. He said Germany is using a grossly undervalued euro to exploit the United States and other European nations. Trump has said previously that a strong dollar hurts U.S. businesses.

Also boosting support, the Organization of the Petroleum Exporting Countries and 11 non-OPEC partners are mostly complying with their agreements to reduce a combined 1.758 million bpd in production in an effort to rebalance the market this year. The latest evidence came from a Reuters' survey today showing OPEC and non-OPEC countries participating in the reductions have achieved an 82% of compliance rate.

Saudi Arabia said last week that OPEC and its allies achieved an 85% compliance rate in the first three weeks of the year, which is strong compared with the previous compliance rate of 57% in 2008 when the group last cut output. OPEC will next month release the first full-accounting of its January production levels.

"The Reuters survey of OPEC compliance rate gave the market a boost as well as a [weaker] dollar, but the market sold off some of the gains because people were nervous about the American Petroleum Institute report which has not been bullish in recent weeks," said analyst Phil Flynn at Price Futures in Chicago.

A survey of analysts by Schneider Electric shows the market expects domestic crude oil inventories to have increased by 1.7 million barrels (bbl) during the week-ended Jan. 27, although stockpiles at the Cushing hub that serves as the delivery point for NYMEX WTI futures are projected to have declined by 250,000 bbl. The survey shows expectations for a 500,000 bbl decline in gasoline inventories and a 1.8 million bbl decline in distillates supplies occurred last week.

API is scheduled to release its weekly oil report at 4:30 p.m. EST and the Energy Information Administration at 10:30 a.m. EST on Wednesday.

The EIA report Wednesday will also show domestic crude production for the week-ended Jan. 27, with EIA last week reporting crude production at an 8.961 million barrel per day (bpd) nearly 10-month high. Baker Hughes last week reported the U.S. oil rig count at a 14-month high of 566 as of the week-ended Jan. 27.

NYMEX March West Texas Intermediate futures settled 18 cents up at $52.81 bbl. The ICE March Brent crude futures contract expired 47 cents higher to $55.70 bbl, with the April contract rising 26 cents to settle at $55.58 bbl.

In products trade, NYMEX February ULSD futures edged 0.50 cent higher to expire at $1.6117 gallon, with March contract settling up 0.66 cent to $1.6308 gallon. February RBOB futures expired up 2.01 cents at $1.5256 gallon, with the April contract settling 1.7 cents higher at $1.5501 gallon.

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