WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and the Brent contract on Intercontinental Exchange sold off Tuesday, falling for a second trade session on expectations that U.S. crude stocks increased last week. Market sentiment turned bearish over U.S.-China trade negotiations, with doubt that a deal will be reached ahead of a December deadline when 15% tariffs on $160 billion in Chinese exports to the United States takes effect.
At settlement, NYMEX West Texas Intermediate December futures dropped $1.84 to $55.21 per barrel (bbl) ahead of the contract's expiration Wednesday afternoon, with the January contract settling at a $0.14/bbl premium to the expiring contract. ICE January Brent futures plunged $1.53 to $60.91/bbl. December ULSD futures were down 4.73 cents to end the session at $1.8574 per gallon, a 2-1/2 month low settlement on the spot continuous chart. December RBOB futures dropped 1.73 cents to a six-week low spot settlement at $1.6037/gallon.
Oil futures posted sharp declines for the second straight day this week, as a long-awaited breakthrough in the U.S.-China trade dispute that seemed imminent last week now appears to be out of reach ahead of the imposition of punitive tariffs next month.
Tuesday's declines also came as traders positioned ahead of the weekly release of supply data on U.S. crude and petroleum stocks. Markets overwhelmingly expect crude oil inventories to have risen 1.6 million bbl during the week ended Nov. 15, with an increase driven by record high domestic production and a flat export rate. In refined products, analysts forecast gasoline stockpiles to have increased by 750,000 bbl last week and distillate supply to have fallen by 1.4 million bbl.
The American Petroleum Institute will release weekly data at 4:30 p.m. EST, and the U.S. Energy Information Administration will publish its weekly accounting at 10:30 a.m. EST Wednesday.
Further weighing on the complex, Russia is reluctant to agree on deeper production cuts at next month's meeting between the Organization of the Petroleum Exporting Countries and allied non-OPEC producers. Reuters reported Tuesday Moscow will once again miss its production target in November, raising its output to over 11.25 million barrels per day (bpd) as the country transitions into the winter months. Earlier reports also indicated Russian crude production is likely to rise in the upcoming months, as Moscow launches two pipelines, the Power of Siberia and ESPO, at the beginning of 2020, further complicating discussions by OPEC+ set for early December.
OPEC+ production cuts have been in place for nearly two years in an effort to reduce global oil inventory and support a higher world oil price, but relentless growth in U.S. shale oil production has undercut those efforts. Some analysts believe a widely expected rollover in OPEC+ production cuts into 2020 will fall flat, with global inventory projected to build next year.
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