WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures and the Brent contract on the Intercontinental Exchange shifted higher midmorning on Tuesday on expectations of a further drop in U.S. commercial crude inventories amid ongoing supply cuts from Organization of the Petroleum Exporting Countries, as concerns over slowing global economy fade.
In midmorning trading, West Texas Intermediate May contract gained $1.21 at $60.03 per barrel (bbl), trading near a four-month high on the spot continuous chart, while ICE Brent May futures moved $0.71 up to $67.92. Nymex ULSD April contract advanced 0.61 cents to $1.9865 gallon, while RBOB April futures surged 2.89 cents to $1.9668 gallon, trading near a $1.9759 fresh five-month spot high on greater seasonal demand.
Tuesday morning, traders returned focus to OPEC supply cuts, with OPEC, Russia and nine non-OPEC producers agreeing to withhold 1.2 million barrels per day (bpd) from the global oil market for six months through the end of June, which has already prompted U.S. commercial crude and products inventories to have declined from a 15-month high in January to a 6-1/2 month low in mid-March. Traders expect a further drop in U.S. commercial crude inventories amid ongoing production cuts from OPEC and its allies.
In the first of the weekly supply reports, American Petroleum Institute is expected to show a 2.4 million bbl drawdown in U.S. commercial crude inventories occurred during the week ended March 22, due for release at 4:30 p.m. ET.
Overnight, Venezuela suffered a second massive power outage, leaving at least 17 out of 23 provinces in the dark just 10 days after the first failure of electrical grid occurred. Earlier this month, Venezuela's blackout halted most oil exports from the OPEC nation, pointing to the crippling effect the degradation of the grid has on its principal industry.
Against a tightening oil market, worries about slowing global economy and knock-on effect on fuel consumption pressured oil futures at the end of last week. The inversion in three-month and 10-year Treasuries spooked investors on Friday, causing a sharp selloff in equities and bond markets, while quickly spilling over into commodities. The inversion follows a worsening outlook for the global economy underpinned by contractions in the manufacturing sectors in Europe and China while the expansion in U.S. manufacturing has also slowed. Tuesday morning, some of these concerns were muted by early data from France, showing 0.3% expansion in the second largest EU economy during the fourth quarter of last year.
Analysts also note the European Central Bank and China earlier this month announcing various efforts to provide stimulus to bolster their economies, while the Federal Reserve pledged a cautious approach before again lifting interest rates, signaling last week a rate hike was unlikely in 2019.
Liubov Georges can be reached at email@example.com
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