Oil Futures Down Ahead of API Report

OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange moved lower in early trade ahead of contract expirations for Brent and oil products at the close, and in advance of weekly supply data from the American Petroleum Institute expected at 4:30 p.m. EDT.

While early indications indicate U.S. crude supplies could tighten further, this morning's declines are due to profit taking following recent gains, with West Texas Intermediate settling above $70 per barrel (bbl) Monday for the first time in six sessions.

"WTI crude tested $70 yesterday so now were seeing some further testing of that test," said Elaine E. Levin, president of Washington, D.C.-based Powerhouse, a commodity hedge and trade advisory. "Trading since the middle of the month has been more bullish, so it's not surprising that were seeing some profit taking. I don't think it's much more than that."

NYMEX September WTI futures were down more than $1, trading just below $69.00 bbl. The expiring September ICE Brent contract eased about 60 cents to $74.40 bbl, while October delivery fell 80 cents to $74.75 bbl. The expiring August RBOB gasoline contract stood 3.25 cents lower near $2.1280 gallon, while the September contract fell about 2.5 cents to $2.0890 gallon. August ULSD futures fell 2.5 cents to $2.1450 gallon and September ULSD dropped a little more than 2.0 cents to $2.1560 gallon.

A Bloomberg survey calls for a 3.0 million bbl decline in commercial crude inventories with 500,000 bbl of the draw seen to have occurred at Cushing, Oklahoma, the NYMEX WTI futures delivery point.

The Energy Information Administration reported Cushing stocks down for a tenth straight week through July 20 to a minimum operating level at 23.7 million bbl, or 30.6% of working capacity.

"We'll have to keep an eye on Cushing stocks which are at minimum levels, since we're hearing 20 million bbl is the absolute lowest it can be and we're getting pretty close to it," said Levin.

EIA will issue its weekly report at 10:30 a.m. EDT Wednesday.

Globally, a Reuters' survey Monday found July output from the Organization of the Petroleum Exporting Countries rose to 32.64 million barrels per day (bpd), up 70,000 bpd from June to a 2018 high with the addition of Congo's production, which joined OPEC last month. Oil production from Iran and Libya declined in July. Bloomberg reports Russian oil production increased to 11.22 million bpd in July, up from 11.1 million bpd in June, while output from Kazakhstan edged up to 1.91 million bpd this month from 1.897 million bpd in June.

"We've been seeing stories all month about increased production from OPEC and non-OPEC members and the thinking is that we're going to need it," said Levin.

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