Oil Futures Settle Higher Tuesday

OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled up Tuesday but well off early session highs after reversing sharply lower on a rumor that the downed Syncrude upgrader in Alberta would return to service sooner than expected. After the chatter was denied by the upgrader's majority-owner, Suncor, oil futures again reversed course, settling higher ahead of the U.S. market's closure Wednesday for the July 4th observance.

Suncor denied the discussion about an earlier than expected return for the upgrader according to a Reuters report, with the company clarifying that there was no change in the end of July timing for the return of the 360,000-barrel-per-day (bpd) unit that was shut June 22 after a power outage tripped a transformer.

Trader chatter also circulated about a potential release from the U.S. Strategic Petroleum Reserve as a means to shore up dwindling oil supplies amid a series of global supply disruptions and the re-imposition of U.S. sanctions on Iran, though those reports remained unsubstantiated at press time.

"The market sold off on two separate rumors on chat rooms that there was going to be a change on the timeline for the return of the Syncrude unit, also the that the SPR could be released," said Elaine E. Levin, CEO and chairman of Washington, D.C.-based Powerhouse, a commodity hedge and trade advisory. "But since the activity on the chat rooms, Suncor has come out and said there was no change to Syncrude's timeline."

Ahead of the rumors, oil futures were charging higher amid stripped down pre-holiday liquidity on news that Libya had declared force majeure on exports from two key oil ports, cutting an estimated 850,000 bpd of exports volume from the civil war-ravaged nation.

NYMEX August West Texas Intermediate futures rallied to a $75.27 per barrel (bbl) better-than-3-1/2-year high on the spot continuous chart early session on tightening global oil supply, and expectations for a fourth straight weekly draw from U.S. commercial crude oil inventories. The Energy Information Administration reported that U.S. crude inventories were drawn down 20 million bbl during the first three week of June.

"You had the chatter, and as a result the market sold off. It's trying to recover a bit, however, this isn't a high-volume trading day," Levin said.

NYMEX August WTI settled 20 cents higher at $74.14 bbl, while the September contracts ended 3 cents lower at $71.59 bbl. ICE September Brent crude settled at $77.76, up 46 cents on the day, while the October contract gained 43 cents to settle at $77.41 bbl.

NYMEX August RBOB futures rose 1.28 cents to $2.1176 gallon at settlement, while the September contract increased 1.23 cents per gallon to $2.0985 gallon. NYMEX August ULSD futures gained 0.84 cent to settle at $2.1642 gallon, while September edged up 0.81 cent to $2.1711 gallon.

Traders will be taking additional price cues from Tuesday's 4:30 p.m. EDT release of supply data from the American Petroleum Institute, which is expected to show a fourth week of consecutive declines in crude oil stocks and draws from gasoline and distillate stocks.

EIA will release its supply report at 11:00 a.m. EDT Thursday, delayed a day by the July 4th holiday.

Brian Whary can be reached at brian.whary@dtn.com