Oil Futures Rally on Tuesday

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange and Intercontinental Exchange Brent futures rallied Tuesday. This came following two down sessions sparked by news that China will take steps to stimulate its economy alongside a report that China resumed buying U.S. crude oil from the United States in December following a truce reached between U.S. President Donald Trump and Chinese President Xi Jinping.

News from Reuters Monday night that three vessels carrying U.S. crude were destined to China enlivened hope the United States and China would reach an agreement to their trade impasse. The two countries are currently honoring a 90-day truce in their trade dispute that expires March 1.

Data released by the General Administration of Chinese Customs also showed crude imports into China at 43.78 million barrels (bbl) in December were up 30% against the comparable year-ago period, and averaged 9.24 million barrels per day (bpd) in 2018, up 10% on an annualized basis. The data worked to offset bearish statistics showing a steep an unexpected decline in China's overall imports and exports in December, the most concrete signs yet that U.S. tariffs on Chinese imports are having an adverse effect on the world's second largest economy. China also announced steps it would take to stimulate its economy, including through tax cuts.

Although having a limited effect on oil futures trading, the parliament in the United Kingdom voted down a negotiated plan by British Prime Minister Theresa May to exit the European Union in a jaw dropping 432 to 202 defeat. May, which will likely face a second no confidence vote, has until Monday (1/21) to provide the UK Parliament a Brexit Plan B.

The British pound initially fell but reversed higher, as May's Brexit plan was widely expected to fail, while the U.S. dollar rallied to a 1-1/2 week high in index trading.

The Energy Information Administration in their Short-term Energy Outlook released Tuesday afternoon revised only slightly lower expectations for world oil production and demand for this year from their December outlook, and maintained its price forecast for West Texas Intermediate in 2019 at $54.19 bbl and revised down its projection for Brent crude $0.48 to $60.52 bbl.

EIA expects world oil production at 101.79 million bpd this year, up 1.38 million bpd from its 2018 assumption, with the global consumption rate forecast at 101.54 million bpd for annualized growth of 1.54 million bpd. The projection shows a modest 25,000 bpd oversupplied market in 2019.

The American Petroleum Institute will release weekly findings for U.S. commercial oil supply later this afternoon, with the EIA scheduled to release its weekly report 10:30 a.m. ET Wednesday.

U.S. commercial crude stocks are expected to have been drawn down about 2.0 million bbl during the week-ended Jan. 11, with gasoline stocks expected to have increased 2.0 million bbl. Distillate fuel stocks are expected to have built by 1.0 million bbl last week.

At settlement, February WTI futures were up $1.60 at $52.11 bbl with ICE March Brent gaining $1.65 to $60.64 bbl. February ULSD futures are up 1.97 cents with a $1.8722 gallon settlement, and February RBOB futures advanced 4.76 cents to $1.4114 gallon.

Brian Milne can be reached at brian.milne@dtn.com

(CZ)

Brian Milne