WASHINGTON (DTN) -- Crude and product futures on the New York Mercantile Exchange and Intercontinental Exchange moved shallowly mixed in afternoon trade Tuesday, as an expected rise in U.S. crude oil inventories countered a weaker U.S. dollar after consumer confidence index for October dropped below market expectations, lifting the odds the Federal Reserve will lower interest rates this week.
NYMEX December West Texas Intermediate futures dropped $0.27 to settle at $55.54 per barrel (bbl), while ICE December Brent futures ended up $0.02 at $61.59 bbl. NYMEX November ULSD futures moved 0.55 cents lower to $1.9426 gallon and the November RBOB contract ended the session 1.29 cents higher at $1.6857 gallon.
December Brent futures and NYMEX November oil products contracts expire Thursday afternoon, with all three markets in backwardation.
U.S. dollar weakened to a 97.380 intra-session low after the U.S. consumer confidence index for October came in below market expectations, with declines driven once again by consumers' concerns over the outlook for business, income and labor markets. The Conference Board reported midmorning consumer confidence in the United States declined 2.9 points to 125.9 in October, well below market expectations for a 128.8 reading.
Typically, a weaker dollar boosts WTI futures since oil trades globally in U.S. dollar denominations. However, the market is concerned consumers could cut back on discretionary spending that, in turn, would weaken demand for crude oil and gasoline, weighing on the oil complex. Still, easing consumer confidence improves the odds the Federal Reserve will cut interest rates by a quarter basis point upon the conclusion of their two-day meeting Wednesday afternoon.
As of Tuesday, the CME FedWatch Tool is predicting a 94% probability of an interest rate cut, with only a 6% probability of no change. Multiple reports indicate the dissent within the central bank on the policy of monetary easing has grown substantially since the central bank's last meeting in mid-September. Many analysts now believe three consecutive cuts in the federal funds rate this year would further underpin support for the U.S. economy, and come at a time when U.S.-China trade tensions appear to have eased in the last few weeks.
Investors will also watch for U.S. GDP reading for the third quarter to be released Wednesday morning, with consensus calling for a 1.7% annual growth rate versus a 2% expansion in the second quarter. Consumer spending is seen slowing to 2.6% in the period from July to October, dragging overall economic growth rate lower.
On Friday, U.S. Bureau of Labor Statistics will release the latest employment figures for September, with expectations again calling for slowing job growth tied to slowing domestic manufacturing activity and exacerbated by a strike at General Motors that ended over the weekend.
On fundamentals, markets now await supply data on last week's change in U.S. crude and petroleum stocks during the week of Oct. 25. DTN forecasts U.S. crude oil inventory built by 1.3 million bbl, while gasoline dropped 2 million bbl and distillate fuel decreased 2.9 million bbl on the week.
American Petroleum Institute will release its weekly estimates at 4:30 p.m. EDT Tuesday, followed by official data from U.S. Energy Information Administration set for release at 10:30 a.m. EDT Wednesday.
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