Oil Higher Ahead of Inventory Reports

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled higher Tuesday afternoon ahead of weekly oil inventory reports that are expected to show stock draws and expectation the Organization of the Petroleum Exporting Counties will extend their production cuts when they meet next week in Vienna.

"Expectations for stock draws for crude and distillates are supporting the market a little," said Tom Bentz, an analyst and vice president for energy derivatives at ABM AMRO. "But we are still consolidating as we wait for API and for OPEC to agree to extend their [output] cuts. There are signs they will extend it to the end of 2018."

A DTN survey shows the market expects crude oil and refined products inventories to have declined during the week-ended Nov. 17. The market estimates an average crude stock draw of 3.6 million bbl, a gasoline stock draw of 750,000 bbl, and a distillate stock decline of 1.75 million bbl during the week under review.

The American Petroleum Institute is set to release its oil statistics for the week-ended Nov. 17 at 4:30 PM ET, while the Energy Information Administration will issue its Weekly Petroleum Status Report at 10:30 AM ET Wednesday.

Globally, OPEC's 14 members have a scheduled biannual summit on Nov. 30 in Vienna where they will host 10 nonmember oil-producing countries to discuss whether to prolong their 1.8 million bpd in supply cuts that has been in place since January.

Saudi Arabia and some of their Arab Gulf allies have proposed a nine-month extension through December 2018. The supply plan has the support of Iran, the third biggest producer within OPEC.

Saudi Arabian energy minister Khalid al-Falih on Monday said they should announce the agreement to extend the cuts next week. However, Russia wants to wait until near the end of the first quarter 2018 when they hope the global supply and demand balance would show a clearer picture of the effects of more than a year of production cuts.

The Kremlin is getting a pushback from Russian oil companies who are complaining that they are being disadvantaged by the policy.

"The Russian position is still unclear because President Vladimir Putin is for extension while Energy Minister [Alexander] Novak and executives of oil companies there are opposed, but I think in the end they will support the extension," said Bentz.

The Russian stance prompted doubts and caution in the oil market on Monday and early today that has limited the upside for oil futures despite recent data that showed a growing market position for higher oil prices, said analysts.

A stronger dollar curbed the upside for oil futures, with the greenback rising to a one-week high today. Oil and the dollar often trade inverse to each other.

NYMEX January WTI crude oil futures settled 41cts higher at $56.83 bbl, off a better than one-week high of $57.22. January Brent rose 35cts to $62.57 bbl on the Intercontinental Exchange, settling at a $5.74 bbl premium to WTI, the narrowest spread at close in a month.

December ULSD futures settled 0.38cts higher at $1.9359 gallon and the December RBOB futures contract rallied 2.93cts to $1.7731 gallon, near a one-week high of $1.7753.

Looking ahead, markets will be closed on Thursday for the U.S. Thanksgiving holiday.

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