Oil Opens Slightly Higher Wednesday
NEW YORK (DTN) -- Spot-month oil futures on the New York Mercantile Exchange retreated from one-week highs, nudging lower at the open Wednesday morning ahead of a weekly government oil report that is expected to show stock draws for domestic crude oil and gasoline inventories.
Traders have been trying to recalibrate their expectations in premarket trade after the American Petroleum Institute surprised the market late Tuesday with a bearish report showing unexpected builds in crude and gasoline inventories, with middle distillate fuels supply increasing by more than expected during the week-ended June 23. The API reported crude stockpiles added 851,000 bbl, gasoline stockpiles up 1.4 million bbl and distillates supply 678,000 bbl higher.
However, the market is reluctant to retreat further at least temporarily in part because domestic crude supply has been tightening and summer demand for gasoline is improving, and last week's selloff was overdone, said analysts.
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The Energy Information Administration will release its corresponding weekly oil report at 10:30 AM ET. If the EIA confirms an increase in crude supply for the week-ended June 23, it would only be the second increase in the past 11 weeks. Crude stocks have fallen in 10 of the past 11 weeks and total crude stocks were 9.1 million bbl above a year earlier level as of the week-ended June 16.
The market is also keen on domestic production that hit a two-year high of 9.35 million bpd during the week-ended June 16. A further surge in oil shale output could support further selloff in midmorning trade, said analysts.
The steady rise in U.S. output and the recovery in Libyan and Nigerian output have negated output cuts of 1.8 million bpd by the Organization of Petroleum Exporting Countries and 10 non-OPEC producers, which sent oil prices into a technical bear market last week. Libya and Nigeria are exempt from OPEC cuts.
At 9:00 AM ET, NYMEX August WTI crude futures were 7cts lower at $44.17 bbl and tested a $44.40 resistance. ICE August Brent crude oil futures gained 5cts to $46.70 bbl, testing resistance at $46.79.
The Brent crude premium to WTI climbed 12cts to $2.53 bbl. The forward curve shows bearish contango price structure for all but the RBOB contract that's in backwardation amid higher summer demand.
NYMEX July ULSD futures eased 0.18cts to a $1.4119 gallon, testing initial resistance at $1.4148. July RBOB futures eased 0.95cts to $1.4503 gallon, with initial resistance pegged at $1.4615.
George Orwel can be reached at George.orwel@dtn.com
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