Oil Futures Edge Higher Tuesday

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange reversed higher on Tuesday, bouncing off four-month lows after the Federal Reserve suggested a rate cut to support slowing economy amid escalating trade disputes.

NYMEX July West Texas Intermediate futures settled $0.23 higher at $53.48 per barrel (bbl), holding above Monday's $52.11 bbl near-four-month low on the spot continuous chart. ICE August Brent ended the session at $61.97, reversing off a four-month spot low at $60.21. NYMEX July ULSD futures settled 1.5 cents higher at $1.8215 gallon after trading at a $1.7824 five-month low on the spot chart. July RBOB futures settled down 1.71 cents at $1.7242 gallon, paring a decline to a $1.6921 three-month spot low.

Oil futures gained in Tuesday trading alongside global equities after Federal Reserve officials signaled another rate cut this year. Fed Chairman Jerome Powell said on Tuesday the central bank could lower interest rates if the economy slows in response to escalating tariffs and global trade uncertainties. The comments follow earlier remarks from Federal Reserve Bank of St. Louis President James Bullard that a lowering of rates "may be warranted soon."

The reassuring comments pushed U.S. equities sharply higher, with Dow Jones Industrial Average rebounding more than 500 points Tuesday afternoon, while S&P 500 climbed 1.7%. Market participants are awaiting Friday's job report for the latest update on U.S. economy and hiring rate.

Despite Tuesday's gains, oil futures were off to a bad start this week after Trump administration opened another front in the U.S. global trade wars by threatening Mexico with a hike in tariffs over immigration disagreement. Investors grew increasingly concerned that aggressive U.S. trade practices would tempter global economic growth. According to reports, Trump's tariffs could effect as much as $360 billion in traded goods and would represent the biggest imposition to date of such duties on a U.S. trading partner. Moreover, Trump's tariffs would cover sectors not previously involved in the trade war, including crude oil and petroleum products. U.S. business groups and lawmakers expressed strong opposition to the plan, pointing to rising costs for U.S. consumers and diminished corporate profits.

Preliminary data on U.S. crude stockpiles for the week ended May 31 is due for release by American Petroleum Institute at 4:30 p.m. EDT, while official figures from Energy Information Administration will be published 10:30 a.m. EDT Wednesday.

Market participants expect U.S. crude oil inventories declined 1.3 million bbl last week, while gasoline stockpiles rose by 200,000 bbl in the profiled week. Stocks of distillate are likely to have risen 100,000 bbl, with forecasts ranging from a decrease of 2.1 million bbl to increase of 2.1 million bbl.

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