Oil Futures Mixed on Trade Tensions

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange were mixed in choppy afternoon trade Tuesday, drawing limited support from a weakening U.S. dollar after U.S. President Donald Trump heightened global trade tensions with a new round of steel and aluminum tariffs and threatened levies on a wide range of products from the European Union.

Following back-and-forth trade, NYMEX January West Texas Intermediate futures settled up $0.14 at $56.10 per barrel (bbl) and ICE February Brent contract moved down $0.10 to $60.82 bbl. Product futures posted losses on Tuesday, with NYMEX January ULSD futures dropping 0.61 cents to $1.8799 gallon and NYMEX January RBOB futures declined 1.04 cents to $1.5629 gallon.

Global financial markets came under selling pressure Tuesday amid a fresh round of trade tensions, with Trump threatening to slap tariffs on roughly $2.4 billion of French products in response to a tax on digital revenues. Earlier in the session, media airwaves were hit with reports the Trump administration imposed fresh levies on steel and aluminum from Brazil and Argentina, citing illegal currency devaluation by those countries. The U.S. dollar plunged to a five-week low at 97.685 in afternoon index trade in response to the bearish development, invariably supporting the oil complex. Even through crude contracts recovered from midmorning lows, global trade tensions capped gains during Tuesday's trade session.

Furthermore, prospects of an imminent resolution in U.S.-China trade conflict seemed to slip away again on Tuesday after Trump said a deal may have to wait until the 2020 elections.

"I have no deadline," said Trump.

Absent an agreement however, the United States is set to impose a 15% tariff on Chinese electronics on Dec. 15. This sentiment was echoed by U.S. Commerce Secretary Wilbur Ross who reiterated on Tuesday that tariffs will go into effect if a deal is not reached by the deadline.

U.S. equities nosedived on Tuesday, with the Dow Jones Industrial Average registering the steepest decline in two months, down 275 points to 27,507 and the S&P 500 dropped 0.65% on the session.

Sovereign bond yields plunged, while market expectations of another rate cut by the Federal Reserve at next week's Federal Open Market Committee meeting increased.

Tuesday afternoon, traders also focused on the weekly release of preliminary supply data by American Petroleum Institute set for release at 4:30 p.m. EST, followed by official numbers from U.S. Energy Information Administration on Wednesday.

Market consensus calls for a mixed inventory report on last week's change in U.S. commercial crude and petroleum supply. Analysts expect commercial crude stocks to have declined by 700,000 bbl, while gasoline stocks increased 2.7 million bbl and distillate fuel inventories to have risen 460,000 bbl during the week of Nov. 29.

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

(CZ)

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