Oil Futures Settle Up as API Eyed

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled a touch higher across the board Tuesday afternoon after a choppy session, boosted by a weaker dollar and a short-covering rally ahead of weekly U.S. petroleum reports that are expected to show stock draws for the week-ended April 21.

The dollar also weakened mostly because the risk to Europe's growth has been lessened by expectation that Marine le Pen will lose the second round of the French elections, said analyst Walter Zimmermann at ICAP in Jersey City, N.J.

The American Petroleum Institute will issue its oil inventory report at 4:30 PM EDT, and the Energy Information Administration's oil report will be released at 10:30 AM EDT Wednesday.

A survey of analysts today shows the market expects stock draws of 2.3 million barrels (bbl) for crude, 125,000 bbl for gasoline, and 2.0 million bbl for middle distillates.

EIA data last week showed crude oil stocks are at 532.3 million bbl on April 14 were 25.0 million bbl higher on the year and 126.8 million bbl above their five-year average.

However, the gains for oil futures were curbed by concerns over global oil oversupply and technical factors. The May, RBOB, ULSD and June West Texas Intermediate crude oil futures contracts have slipped below their technical support points, generating more selling pressure.

"Major support for West Texas Intermediate crude contract was talked at $49.30 and although we dipped below that intraday, the rally at the end did manage to get us back above that critical level…that's positive," said David Thompson, executive vice president at Powerhouse. "If $49.30 breaks then next support is $47 and then $42."

The June WTI crude contract had fallen for six straight sessions to a one-month spot low of $48.87 on the spot continuation chart before the latest upturn during market-on-close.

The market remains concerned that the Organization of the Petroleum Exporting Countries won't succeed in drawing down global inventories, as plans to extend the current production cuts of nearly 1.8 million barrels per day (bpd) for six more months faces resistance from Russia.

Russia has not fully complied with its 300,000 bpd in pledged output cut. OPEC will meet on May 25 to deliberate on compliance and whether the production cuts should be extended for six months after their June 30 expiration.

"Russian Energy Minister Alexander Novak has said an extension is under consideration, but other officials have warned that Russian production could climb to new highs in the absence of a deal," said analyst Tim Evans at Citi Futures.

Without an extension of the output cuts, global oil supply will remain above their five year average and rising U.S. production would further boost global supplies despite an improvement in summer demand, analysts said.

Some traders also squared their positions ahead of options expiration for NYMEX May RBOB and ULDS futures and June Brent crude contract on the IntercontinentalExchange, with the underlying futures contracts expiring on Friday, Evans added.

June WTI crude futures settled 33 cents higher at $49.56 bbl, reversing off a one-month spot low of $48.87 and punching through support at $49.30. June Brent crude rallied 50 cents to $52.10 bbl after bouncing off a one-month low at $51.30. The trans-Atlantic arbitrage is up 17 cents to a $2.54 bbl premium over WTI.

NYMEX May ULSD futures were up 0.25 cent at $1.5452 gallon settlement, bouncing off a one-month low of $1.5287. NYMEX May RBOB futures gained 0.16 cent to $1.6230 gallon, reversing off a $1.6003 one-month spot low.

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