Oil Futures Lower Ahead of US Data

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled lower for the second day on Tuesday after a choppy session, falling to better than one-week lows on technical pressure and concerns about rising domestic crude production.

Losses were limited by a weaker U.S. dollar and the growing prospect of stronger global economic growth that would boost demand for oil.

The market now awaits a weekly oil report by the American Petroleum Institute due out at 4:30 p.m. eastern. The market also is mulling over whether the Organization of the Petroleum Exporting Countries and its 11 non-OPEC producers will roll over their current production cuts that are set to expire in June for six more months.

NYMEX May West Texas Intermediate crude futures settled down 24 cents at $52.41 a barrel (bbl), paring losses after posting a 12-day low of $52.10, briefly dipping below initial technical support at $52.17. The May WTI contract expires Thursday afternoon. June WTI futures, which traded at a 44 cents premium to the expiring May contract, settled 26 cents lower at $52.85 bbl.

On the Intercontinental Exchange, June Brent crude tumbled 47 cents at a $54.89 bbl settlement, off an 11-day spot low of $54.61, and trading at a $2.48 bbl premium to WTI. The arbitrage shrank by 23 cents on the day to the lowest level since March 31.

NYMEX May ULSD futures settled down 1.10 cents at $1.6219 gallon, cutting losses after posting a $1.6128 11-day spot low. NYMEX May RBOB futures eased 0.68 cents to $1.7110 gallon, off a two-week low of $1.6928.

"The petroleum markets have rebounded from lower levels, weighing the odds of whether OPEC will eventually commit to an extension of first half production limits against the recovery in US crude oil production that continues to run ahead of consensus expectations," Citi Futures analyst Tim Evans said.

OPEC and its 11 non-OPEC producing allies that include Russia agreed last year to cut nearly 1.8 million barrels per day (bpd) of production from Jan. 1 to June 30 in order to rebalance global supply and demand, but rising U.S. production has undercut that effort.

Several OPEC members have called for those cuts to be extended beyond June, but Russia has reportedly not accepted, and so the prospects of an extension of the cuts look uncertain. Citigroup said in a report Tuesday that if the cuts are extended, oil prices would move higher, with the bank forecasting WTI prices averaging $62 bbl later this year.

On domestic supply, the market expects weekly data by the API and the U.S. Energy Information Administration to show stock draws of 2.0 million bbl for crude and gasoline and 1.3 million bbl for middle distillates.

On Monday, the EIA's Drilling Productivity Report for April estimated oil production from seven major U.S. shale plays would rise by 124,000 bpd to 5.193 million bpd in May from April.

In currency trade, the U.S. dollar fell to a three-week low Tuesday following the release of soft U.S. housing and factory data for March and after British Prime Minister Theresa May called for an early general election. The news of the British elections boosted the pound against the greenback.

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