CRANBURY, N.J. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Brent crude on the Intercontinental Exchange settled the midweek session mixed amid renewed concern over slowing world economic growth and signs the deterioration is bleeding into the U.S. economy joined by a big build in U.S. crude stocks counterbalanced by steep production cuts by the Organization of the Petroleum Exporting Counties, while declining gasoline inventory against year ago boosted RBOB futures to the highest settlement since Oct. 30, 2018.
Nymex April RBOB futures settled up 2.16 cents at $1.7890 gallon, with the April ULSD contract ending flat, down two points at $2.0162. Nymex April West Texas Intermediate futures settled down $0.34 at $56.22 barrels (bbl), and the ICE May Brent contract ended up $0.13 at $65.99 bbl.
The Federal Reserve's afternoon release of its Beige Book of regional economic activity showed slight-to-moderate growth in February for 10 of the 12 Fed districts, with flat conditions in the remaining two. A handful of districts said the partial federal government shutdown had impaired activity in some economic sectors, while several districts said a slowdown in retail and auto sales was due to harsh weather and higher borrowing costs.
"Manufacturing activity strengthened on balance, but numerous manufacturing contacts conveyed concerns about weakening global demand, higher costs due to tariffs, and ongoing trade policy uncertainty," according to the monthly report from central bankers.
Similar concerns were highlighted in an interim economic forecast from the Organization for Economic Cooperation and Development released this morning, in which the 35-country bloc cited a slowdown in trade and global manufacturing.
"It underlines that further trade restrictions and policy uncertainty could bring additional adverse effects on global growth," said OECD, downgrading world economic expansion expectations for this year by 0.2% from November's forecast to 3.3%.
The related concerns come as reports indicate a bilateral trade agreement between the United States and China could be reached by the end of March, while China, acknowledging its economy is slowing, will inject stimulus through lower taxes on business and ease lending requirements.
"While policy stimulus is expected to help offset weak trade developments in China, risks remain of a sharper slowdown that would hit global growth and trade prospects," said OECD.
The United States, where the federal funds rate is between 2.25% and 2.5%, has greater opportunity then its European counterparts to use monetary policy to stimulate the economy. The Fed's stance earlier this year that it would be patient before lifting interest rates cleared the way for sharp gains in equities and oil futures during the first two months of 2019 following a fourth quarter meltdown.
A larger-than-expected 7.1 million bbl build in U.S. commercial crude stocks during the week-ended March 1 reported Wednesday morning by the Energy Information Administration was offset by still high U.S. crude exports, averaging 2.669 million bpd so far in 2019, and higher domestic demand for crude in the coming weeks with the end of the refinery maintenance season.
U.S. crude supply, with EIA showing domestic crude output at a record high 12.1 million bpd for late February, is offset by steep production cuts by OPEC. Saudi Arabia has indicated its output would average 9.8 million barrels per day (bpd) this month, down from a record high 11.016 million bpd in November.
A greater-than-expected 4.2 million bbl draw in gasoline stocks to an eight-week low at 250.7 million bbl for the week-ended March 1 bolstered RBOB futures, with gasoline stocks below the year-ago total last week for the first time in 8-1/2 months.
Brian L. Milne can be reached at firstname.lastname@example.org
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