Oil Rallies on Weekly Supply Data

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures and the Brent contract on the Intercontinental Exchange settled higher Tuesday, with both the West Texas Intermediate and Brent benchmarks trading just below last week's four-month highs.

Nymex May WTI futures settled $1.12 higher at $59.94 barrels (bbl), reversing higher following two consecutive session declines, trading intraday at a penny below last Week's $60.39 four-month high on the spot continuous chart. ICE May Brent edged up $0.76 at $67.97 bbl, continuing an advance from last week's $66.20 bbl low. Nymex April ULSD futures advanced 0.95 cents to settle at $1.9899 gallon, shaking off Monday's losses after testing retracement support at $1.9509. Nymex April RBOB futures continued to grind higher, settling up for a ninth consecutive session amid bullish seasonal features, ending at a $1.9557 gallon fresh better-than five-month high spot settlement. Nymex April products and ICE May Brent futures expire at Friday's close (3/29).

Oil futures rallied Tuesday afternoon ahead of the weekly rundown of supply figures, while market expectations lean towards another across-the-board inventory drawdown. Estimates for crude inventory are mixed between a draw and build, settling on a 1.25 million decline. Gasoline stockpiles for the week-ended March 22 are expected to have declined 2.5 million bbl, while distillate fuel inventory is seen to have been drawn down 1.0 million bbl. Last week, EIA data showed a large an unexpected commercial crude supply draw of 9.6 million bbl for the week ended March 15, partly driven by declining U.S. crude imports from Saudi Arabia and Venezuela.

Saudi Arabia, the biggest oil exporter in the world, has drastically cut crude exports in March to 7.1 million barrels per day (bpd), while reportedly turning away 635,000 bpd in sales requests by interested parties for April deliveries. HFI Research Group forecasts Saudi Arabia's exports in April down 500,000 bpd to 6.5 million bpd.

Venezuela's struggling oil industry suffered two massive blackouts within the last month, crippling oil exports and heavy crude oil upgrading processors in Orinoco Belt.

In addition, U.S. sanctions against Iran have already tightened the global crude market, with Washington aiming to further reduce Iran's oil exports below 1 million bpd following the expiration of waivers in May. According to Reuters, the U.S. goal is to limit the number of waivers it grants and cut Iran's oil exports nearly 20% from the current level, gradually reducing exports to zero. Despite Trump Administration plans to extend certain waivers, it seeks the commitments from purchasing countries to voluntarily reduce oil imports from Iran.

In an official statement from South Korean government, the country will seek the extension of the waiver during the government visit in Washington this week, as it continues to diversify sources of oil imports. South Korea's oil imports from Iran fell 12.5% year-on-year in February, customs data showed this month.

The Trump administration unilaterally reimposed sanctions on Iran's oil exports in November, while simultaneously granting eight countries, including India, China and South Korea waivers due to expire in May.

Liubov Georges can be reached at liubov.georges@dtn.com