Oil Futures Settle Higher Tuesday

Oil Futures Settle Higher Tuesday

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled higher Tuesday after seesawing most of the session, rallying this afternoon ahead of weekly oil data from the American Petroleum Institute that's expected to show stock draws for crude oil and refined products.

The API report for the week-ended Aug. 18 is due out at 4:30 p.m. EDT and a survey of analysts shows the market expects crude oil supply to have declined by 3.8 million barrels (bbl), gasoline stocks drawn down 2.0 million bbl and distillate inventory 500,000 bbl lower on the week.

The Energy Information Administration will issue its data on Wednesday morning. If analysts are correct in their assumptions, it would be the ninth straight crude oil stock draw, draining crude stockpiles to the lowest level since January 2016.

While domestic market is tightening after U.S. crude supply declined by 69 million bbl since their March peak at 535.5 million bbl, analysts said their focus is on the bigger global picture, where supply remains at historically high levels.

The gains today for futures complex were capped after Libya announced the restart of its Sharara crude oil production that was disrupted by militia activity over the weekend.

Earlier today, an official at Libya's state-owned oil company said they were shutting the field again hours after reopening on Tuesday morning following a three-day pipeline shutdown by local militia. The 270,000-barrel-per-day (bpd) Sharara is Libya's biggest oilfield and exports its crude through a connecting pipeline to Zawiya oil terminal.

Rising output by Libya, Nigeria and the United States have offset the 1.2 million bpd output cuts by the Organization of Petroleum Exporting Countries. Libya, exempt from that supply agreement, has recovered most of its production this year after years of sabotage by civil conflict.

"News out of Libya has been a source of confusion, with the National Oil Corp lifting a force majeure on shipments from the Sharara oil field, but other sources reporting that the restart of the 270,000 bpd field is on hold," said analyst Tim Evans at Citi Futures.

On Monday, OPEC officials met with their Russia counterparts to discuss compliance with their supply agreement, including a 558,000 bpd output cuts by 10 non-OPEC producers.

Quoting a source at the Vienna talks, Bloomberg reported that OPEC compliance rate was 94% in July, which is higher than the 75% reported last week by the International Energy Agency.

Traders squared their positions before the expiration of September West Texas Intermediate crude futures contract.

"September WTI crude oil expires today, and so book squaring in that contract and related crack spreads is also on the agenda," said Evans.

Traders of crude oil and gasoline also have particular interest in the remnants of Tropical Storm Harvey that's expected to strengthen to Category 1 hurricane status as it crosses the Gulf of Mexico toward a possible Friday landfall on the Texas Coast.

"While not a major storm, this will at least serve as a drill for refiners along the coast, in our view," added Evans.

September WTI crude futures expired 27 cents higher at $47.64 bbl while the October WTI contract settled 30 cents higher at $47.83 bbl. October Brent crude on the IntercontinentalExchange gained 21 cents to $51.87 bbl.

September ULSD futures climbed 2.0 cents to $1.5912 gallon while September RBOB futures edged up 0.67 cent to $1.5908 gallon at settlement.

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