Oil Futures Mixed Before API Data

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled mixed Tuesday afternoon after a choppy session with spot-month West Texas Intermediate crude and ULSD posting modest gains while RBOB reversed lower in market-at-close trade.

The futures complex had a weak start and spent most of the session in negative territory, but WTI and ULSD moved higher half-an-hour before the close of regular trade on short-covering ahead of weekly oil data by the American Petroleum Institute, said analyst Phil Flynn at Price Futures.

"This was just short-covering before API data that should show stock draws, and we have Memorial Day holiday ahead of us ... demand is supposed to be high," Flynn said.

The American Petroleum Institute is due to release its oil inventory report for the week ended May 19 at 4:30 p.m. EDT, with the U.S. Energy Information Administration set to issue its supply data at 10:30 a.m. EDT on Wednesday.

A survey Tuesday showed expectations domestic crude inventories declined by 2.7 million during the week ended May 19 and gasoline supplies down 800,000 bbl. Distillate stockpiles are projected to have increased some 300,000 bbl.

Earlier, the futures complex came under pressure, reversing lower after President Donald Trump's budget proposal showed his administration plans to sell oil from the Strategic Petroleum Reserve.

Such a move could further frustrate efforts by the Organization of Petroleum Exporting countries to reduce the global oil surplus.

The White House proposed raising $500 million from the emergency oil reserves sales in fiscal year 2018, and as much as $16.6 billion in oil sales over the next decade.

Trump's plan would add barrels to the market just when OPEC hopes to bring down global oil inventories to their five-year average. OPEC has so far failed to make a substantial dent on global supply glut during the nearly five months it has been cutting production, pursuant to a six-month deal members signed last fall.

OPEC and 11 non-OPEC producers are now considering extending production cuts of 1.8 million bpd through early 2018. The producers will meet on Thursday (5/25) to debate and potentially approve the proposal, which has been negotiated by Saudi Arabia and Russia.

The current production quota scheme started in January and is set to expire on June 30.

OPEC officials have in the past few days suggested they are near a deal to extend the current production cuts for nine months, although reports show Iraq still needs to be convinced of the necessity for a long-term supply deal.

Iraq, which plans several production projects, has agreed to rollover the cuts for another six months, but has not agreed to go along with a nine-month extension. United Arab Emirates oil minister said Tuesday what is clear at this moment is there will be a six- or a nine-month extension. The comment bolstered most oil futures contracts.

At settlement, NYMEX July WTI crude futures contract was 34cts higher at $51.47 bbl, off a $51.55 near five-week high. July Brent futures on the IntercontinentalExchange climbed 28cts to $54.15 bbl, off Monday's $54.37 one-month high. The Brent premium to WTI eased 46cts to $2.68 at the close, retreating from Monday's $3.14 two-month high.

NYMEX June ULSD futures edged 0.46cts higher to $1.6067 gallon, off a near five-week high of $1.6122. June RBOB futures were little changed, settling 0.12cts lower at $1.6614 gallon after reversing off a fresh four-week spot high at $1.6691.

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