WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and Intercontinental Exchange Brent futures turned lower in overnight trade, as market participants assess the supply impact of the latest flare-up in the Middle East amid rising geopolitical tensions while awaiting U.S. weekly inventory data.
NYMEX September West Texas Intermediate futures were $0.30 lower near $56 per barrel (bbl) at 9 a.m. ET, with ICE September Brent down $0.35 near $62.90 bbl. NYMEX August ULSD futures were down 0.3 cents at $1.8955 gallon, with August RBOB flat at $1.8280 gallon.
Oil futures inched lower after trading in narrow ranges early Tuesday, while markets continue to exhibit a rather muted reaction to escalating tensions between Iran and the West in the world's busiest chokepoint for crude shipments. International Energy Agency said Tuesday morning emergency oil stocks are sufficient and available to cover any supply disruption in the Strait of Hormuz for "an extended period" of time. Paris-based energy watchdog previously estimated that global oil supply exceeded demand by 900,000 barrels per day (bpd) in the first six months of 2019 and commercial stocks in Organization for Economic Cooperation and Development countries stand at more than 2.9 billion bbl -- well above the five-year average.
Market analysts also note sizable production gains in the United States and partnership between Saudi Arabia and Russia on balancing the global market have kept oil prices relatively subdued despite security challenges in the Middle East.
"The surge in U.S. production to over 12 million bpd has created a U.S. firewall against these risks or perceived risks to supply. They can take all tankers they want. We still haven't lost any oil yet," said John Kilduff from Again Capital.
Last week, U.S. Energy Information Administration increased its forecast for tight shale oil production from seven key U.S. producing regions, up 49,000 bpd or 0.6% in August from the previous record of 8.497 million bpd in July.
Market participants will get data on U.S. inventory levels from the American Petroleum Institute set for release at 4:30 p.m. ET, while official government data will be published 10:30 a.m. ET on Wednesday (7/24). Market participants mostly expect U.S. commercial crude inventories declined 4.4 million bbl in the week ended July 19, but remain divided on gasoline inventories with some calling for a decline in stocks to have occurred while others expect a build. On average, analysts were looking for a decline of 1.13 million bbl in gasoline stockpiles for last week. Domestic distillate inventories are expected to have climbed 1.7 million bbl in the profiled week.
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