Oil Futures Higher in Early Trade

WASHINGTON (DTN) -- New York Mercantile Exchange nearest delivery oil futures and Intercontinental Exchange Brent shifted higher in early trade Tuesday, bolstered by an uptick in compliance from Organization of the Petroleum Exporting Countries and a weaker U.S. dollar, while market expectations of a crude draw in U.S. inventories brought in additional buying interest.

At 9 a.m. ET, NYMEX October West Texas Intermediate futures were up $0.90 near $54.55 per barrel (bbl), with the ICE October Brent contract $0.70 higher at $59.40 bbl, holding a roughly $0.50 premium to the November contract. NYMEX September ULSD futures were 1.85 cents higher near $1.8110 gallon, with the October contract holding an 85-cent premium to the September contract ahead of Friday's expiration. NYMEX September RBOB futures were 3.2 cents higher at $1.6485 gallon with four days left of trading, with October RBOB trading at an 11cts discount to the expiring contract.

Oil futures edged higher early Tuesday after OPEC released the latest compliance numbers with their ongoing supply accord, which showed the highest conformity level of the year. According to Joint Monitoring Market Committee, OPEC compliance with production quotas rose to 159% in July from the average of 134% since the beginning of the year, offsetting some of the uncertainty in the market due to ongoing economic worries. The JMMC highlighted that OPEC's efforts to arrest global inventory growth should lead to significant draws in the second half of the year.

The market has been trading on competing headlines from Group of Seven Summit in Biarritz, France, where U.S. President Donald J. Trump addressed the ongoing trade war with Beijing and Iran's nuclear program. Oil futures came under selling pressure on Monday after Trump said he may meet with Iranian President Hassan Rouhani to resolve longstanding tensions around Iran's nuclear ambitions, potentially leading to removal of U.S. sanctions and reinstating the flow of Iranian crude oil into global markets. Rouhani replied that all U.S. sanctions must be lifted before a meeting would take place.

Earlier last week, U.S. Secretary of State Pompeo said the United States succeeded in removing nearly 2.7 million barrels per day (bpd) of Iranian oil from the global markets, while industry data showed crude exports from Iran plunged to 450,000 bpd last month, down 49% from 874,666 bpd just four months ago.

Domestically, market participants await the weekly rundown of supply statistics, with expectations another draw in U.S. crude supplies occurred in the week of Aug. 23. One survey found expectations call for U.S. crude stocks to have fallen 4.7 million bbl last week, as inventories typically drawn in this time of the year ahead of refinery maintenance season. In refined products, analysts expect gasoline inventories to have declined 530,000 bbl last week, while distillate fuel supply is expected to have increased by 700,000 bbl in the week reviewed.

American Petroleum Institute will release its weekly report at 4:30 p.m. ET, while U.S. Energy Information Administration will publish official figures 10:30 a.m. ET Wednesday.

Looking ahead, this week will present a slew of potentially market moving data, starting with the release of the latest U.S. consumer confidence index at 10 a.m. ET. Thursday morning, data will be released showing the second quarter reading of French and U.S. gross domestic product, with market consensus eyeing second quarter U.S. GDP to have increased at a 2% annualized rate.

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

(BAS)