Oil Futures Higher Tuesday

WASHINGTON (DTN) -- New York Mercantile Exchange nearest delivery oil futures and Intercontinental Exchange Brent continued higher in early trade Wednesday after industry data showed a much-larger-than expected weekly draw from U.S. commercial crude inventories, while upbeat U.S. economic indicators and continued discipline by Organization of the Petroleum Exporting Countries fueled additional buying interest.

NYMEX October West Texas Intermediate futures were up $0.95 near $55.90 per barrel (bbl) at 9 a.m. ET, with ICE October Brent $0.85 higher near $60.35 bbl ahead of Friday's expiration, holding a $0.50 premium to the November contract. NYMEX September and October ULSD futures were both up 2.6 cents at $1.8420 and $1.8490 gallon, respectively, with the September contract set to expire at week's end. NYMEX September RBOB futures were 1.5 cents higher at $1.6650 gallon ahead of expiration Friday afternoon, with the October contract trading at an 11-cent discount to the expiring contract, reflecting the seasonal change away from peak gasoline demand.

NYMEX WTI futures traded at a one-week high early Wednesday, lifted by a massive 11.1 million bbl draw in U.S. crude stocks during the week ended Aug. 23 reported late Tuesday by the American Petroleum Institute. If confirmed by official government data later Wednesday, the drawdown would be the largest decline in domestic crude stockpiles since June 5. API data also showed declines in both gasoline and distillate stocks, albeit the 349,000 bbl gasoline draw was lower than market expectations, while a 2.5 million bbl drop in distillate fuel inventory topped estimates.

Market participants now await the weekly rundown of supply statistics from the U.S. Energy Information Administration set for release 10:30 a.m. ET. U.S. consumer confidence reading for this month released Tuesday exceeded the most bullish forecasts, underpinning gains for the oil complex including a 2.4% advance by WTI futures. Against escalating trade tensions and volatility in equities, U.S. consumer confidence was reported at 135.1 for this month, slightly below July's index of 135.8, but contrasting sharply with calls for the index to fall into a 128 to 130 range. Following sizable gains in the U.S. labor market during the second quarter, the bullish call on consumer confidence in August indicated continued strength in the domestic economy.

Investors now await the release of the second quarter reading of U.S. gross domestic product due Thursday, with market consensus calling for U.S. GDP to have increased at a 2% annualized rate. In international news, Iranian President Hassan Rouhani rebuked reports of a possible breakthrough with the United States regarding the country's nuclear program, suggesting that a meeting between him and U.S. President Donald Trump would take place only if all U.S. sanctions are removed immediately.

For oil investors, the remarks maintained the status quo, signaling continued exclusion of more than 2 million barrels per day (bpd) of Iranian crude from the global market. The loss of a significant volume of Iranian oil exports offsets surging oil production in North America that could flood the global market with crude oil.

Lost Iranian oil exports, alongside a collapse in Venezuela's oil production, helped to enable OPEC in achieving the highest compliance rate with their production agreement of the year this month. Joint Monitoring Market Committee reported Tuesday OPEC's conformity level of 159% will likely arrest the global inventory growth in oil and lead to significant draws in the second half of the year.

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

(BAS)