NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures moved higher at the open of regular trade Tuesday, led by a rally by the RBOB contract amid expectations summer demand for gasoline will be strong and cautious optimism the Organization of the Petroleum Exporting Countries would extend their output cuts that are due to expire in June through the end of this year.
"Not only is there talk of summer demand for gasoline, but also there was a rally early this morning due to talk overnight that OPEC is now laying the groundwork for an extension of the production cuts," said analyst Phil Flynn at Price Futures.
The April NYMEX RBOB and ULSD futures contracts both rallied to 11-day highs of $1.6350 gallon and $1.5360 gallon, respectively, this morning, with RBOB the strongest part of the oil complex. At last look, the NYMEX April ULSD futures contract climbed 1.67cts higher to $1.5308 gallon and the NYMEX April RBOB futures contract was up 1.99cts at $1.6312 gallon settlement, off a 10-day high of $1.6248.
May NYMEX West Texas Intermediate crude futures are up 19cts at $49.10 bbl while the April contract that expires later this afternoon is up 21cts at $48.43 bbl.
May Brent crude futures on the IntercontinentalExchange added 20cts to $51.82 bbl. In arbitrage trade, the Brent premium over WTI was little changed at a $3.39 bbl better-than one-year high.
"We see the current cycle of scheduled refinery maintenance as the most reliable fundamental support for gasoline, with the need for refiners to work off winter grade fuel rather than carry it as inventory through the summer as a close second," said Tim Evans, an oil specialist at Citi Futures.
An early survey of analysts showed the market expects U.S. gasoline stocks to have been drawn down during the week-ended March 17 by 1.8 million bbl and distillate supplies are projected to have fallen 2.0 million bbl. A 1.5 million bbl week-over-week build in domestic crude stockpiles is estimated by the survey.
Analysts have noted in recent days that Saudi Arabia has warmed up to the idea expressed almost month ago by a few OPEC members that the current 1.2 million bpd in production cuts should be extended if global inventories remain stubbornly high.
Saudi Oil Minister Khalid al-Falih recently talked of a willingness by many OPEC members to extend the cuts, but the Saudis themselves have not yet said they are willing to support the move at this point.
The OPEC output cuts coupled with 558,000 bpd in non-OPEC cuts agreed to last December have supported oil prices since the start of 2017, but higher U.S. crude oil inventories and rising domestic crude production prompted speculative traders to pare long crude oil positions over the past two weeks.
"The big question now is will we see another stock build and production increase in the United States," said Flynn, and added that a weakening U.S. dollar also aided the oil futures complex.
The U.S. dollar dropped sharply, declining in index trade to a seven-week low.
George Orwel can be reached at firstname.lastname@example.org
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