Oil Little Changed in Tuesday Trade

NEW YORK (DTN) -- New York Mercantile Exchange (NYMEX) spot-month oil futures were little changed Tuesday morning after settling at three-week highs Monday and in front of weekly supply reports that are expected to show builds in U.S. crude and gasoline inventories.

The flat trade follows Monday's rally that was supported, in part, by a surge in equities, with the Dow Jones Industrial Average and S&P 500 Index starting slightly lower Tuesday morning. The U.S. dollar edged higher ahead of the first Congressional testimony by new U.S. Federal Reserve Chairman Jerome Powell, with domestic oil prices having an inverse relationship with the greenback since oil trades internationally in dollar denominations.

The market, which remains volatile, will focus on Powell's comments about inflation and the pace of expected interest rate hikes, said analysts. In a prepared speech released before his 10 a.m. ET testimony, Powell has said risks to the Fed's outlook are balanced.

His comments come in front of weekly supply reports from the American Petroleum Institute (API) later Tuesday afternoon and the Energy Information Administration (EIA) Wednesday morning.

A survey of analysts shows a market consensus estimates domestic commercial crude oil stocks increased last week by 3.75 million barrel (bbl). Crude supply at the Cushing tank farm in Oklahoma that serves as the underlying delivery location for the West Texas Intermediate (WTI) futures contract on NYMEX is estimated to have increased by 100,000 bbl.

Analysts said this expected crude supply increase is predicated on a drop in refinery operations due to seasonal maintenance programs.

The survey also showed expectations for a 1.75 million bbl build in gasoline stocks and a 1.75 million bbl drawdown in middle distillate fuel inventories.

Meantime, the International Energy Agency Tuesday morning said the United States is set to surpass Russia and Saudi Arabia in oil production this year to become the world's biggest oil producer.

IEA is reportedly forecasting U.S. production topping 11 million barrels per day (bpd) in 2018, a year earlier than previously expected, which could delay the timeline for market rebalancing despite 1.8 million bpd in production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and 10 non-OPEC oil producing countries that runs through year end.

The flat opening also comes in front of the expiration of ICE April Brent crude and March ULSD and RBOB futures on NYMEX Wednesday afternoon.

In early trade, NYMEX April WTI crude futures were 22 cents lower at $63.69 bbl while ICE April Brent crude futures eased 17 cents to $67.33 bbl and May Brent was down 14 cents at $67.15 bbl. NYMEX March RBOB futures slipped 32 cents to $1.8235 gallon and March ULSD futures eased 21 cents to $1.9838 gallon.

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