Oil Mixed in Tuesday Trade

NEW YORK (DTN) -- New York Mercantile Exchange (NYMEX) spot-month oil futures were shallowly mixed with an upside bias Tuesday morning, lent support on a combination of factors including expectation for weekly oil stock draws in the United States, continuing concern about tensions in the Middle East, and easing trade war fears that have spurred a rally for equites.

An early survey of analysts found that the market expects U.S. inventories of crude oil, gasoline and distillate fuel to have all been drawn down by 3.0 million barrels (bbl) during the week ended March 23.

On Monday, West Texas Intermediate futures came under selling pressure after trade sources said data collection firm Genscape reported that crude stocks at the Cushing depot in Oklahoma, the delivery point for the WTI contract, increased last week by 2.18 million bbl.

Growing concern that rising tension in the Middle East could lead to oil supply disruptions or curtail exports have underpinned support for crude prices in March.

Saudi Arabia this past weekend intercepted ballistic missiles fired by Houthi militia in Yemen. The Houthis are backed by Iran, although Tehran denies involvement in the fighting.

The Saudis reportedly want to aggressively challenge Iran, and have called a nuclear accord reached by Tehran with Western nations, including the United States in 2015 "flawed."

U.S. President Donald Trump, who campaigned against the agreement, said he would not again certify the accord without changes. The agreement comes before Trump for recertification in May. Ending the agreement could re-impose sanctions on Iran, adversely effecting oil exports from the third largest oil producer in the region.

Also underpinning price support is flagging oil production from Venezuela due to mismanagement and underinvestment for years by the oil producer and member of the Organization of the Petroleum Exporting Countries (OPEC). Venezuela is in financial collapse under the kleptocratic rule of Nicolas Maduro, with no production projects in the past decade, and three oil refineries with a nearly 650,000 barrel per day (bpd) capacity expected to shut down in the coming weeks because of a lack of oil and workers.

In early trade, NYMEX May WTI crude oil futures were little changed near $65.50 bbl, trading Monday at a $66.55 two-month high on the spot continuation chart. ICE May Brent crude oil contract was up modestly near $70.25 bbl, trading at a $71.05 two-month spot high on Monday ahead of the May contract's expiration Thursday afternoon. June Brent held a roughly 75 cents discount to the expiring May contract in the backwardated market.

NYMEX April ULSD futures added 1.15 cent to $2.0265 gallon, paring an advance to $2.0460 two-month spot high. The April contract expires Thursday afternoon, with May ULSD futures holding a slight premium to the April contract.

NYMEX April RBOB futures edged up about 0.5 cent to $2.0135 gallon amid inside trade, holding below Monday's $2.0463 gallon seven-month high on the spot continuation chart ahead of Thursday's contract expiration. The May contract is trading at a roughly 1 cent premium to April.

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

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