Crude Oil Higher Ahead of API Data

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange edged mostly higher on Tuesday. U.S. crude benchmark advanced to the highest settlement since the mid-September attack on Saudi Arabian oil infrastructure, boosted by steep production curbs by the Organization of the Petroleum Exporting Countries and partners and reports of a potential delay in new U.S. tariffs on Chinese exports to the United States set for Sunday, Dec. 15.

Tuesday afternoon, traders also positioned ahead of weekly release of supply data on U.S. crude and petroleum inventories, with consensus calling for a hefty 2.9-million-barrel (bbl) drawdown in crude stocks during the week of Dec. 6. Markets mostly expect gasoline supply to have increased by 2.9 million bbl on the week and distillate fuels to have built by 2.7 million bbl.

American Petroleum Institute will release preliminary figures 4:30 p.m. EST, followed by official figures from U.S. Energy Information Administration 10:30 a.m. EST on Wednesday.

At settlement, NYMEX January West Texas Intermediate futures gained $0.22 to $59.24 per bbl -- the highest settlement since Sept. 16, and ICE February Brent contract inched $0.09 higher to $64.34 per bbl. NYMEX January ULSD futures rallied 2.13 cents to $1.9655 gallon, a better-than-six-week high on the spot continuous chart. The exception to the complex Tuesday was the January RBOB contract that dipped 0.23 cent in market-on-close trade to a $1.6525 gallon settlement.

Tuesday's mostly higher session was partly spurred by reports U.S. and Chinese negotiators are considering a delay of new tariffs set to take effect this weekend, improving market sentiment on the trade outlook for both countries.

The Wall Street Journal reported Beijing offered new concessions in trade talks, including regulations to level the playing field for U.S. companies in China. It remains unclear whether the talks are being extended or a phase-one trade deal will be agreed upon by the end of this week. Markets will continue to pay outsized attention to the progress in the bilateral trade talks this week.

Domestically, investors' expectations are for the central bank to hold interest rates steady at the conclusion of their two-day Federal Open Market Committee meeting Wednesday after cutting rates at three consecutive meeting this year. At each of the last three Fed meetings in July, September and October, the Feds cut the federal funds rate by 25 basis points, which now stands between 1.5% and 1.75%.

Separately, EIA on Tuesday lowered its forecast for OPEC production in 2020, driven by the bloc's deeper supply targets agreed to last week, while also downgrading output from non-OPEC countries. Still, the agency sees production gains from outside the cartel and lower demand growth for both 2019 and 2020 years to result in oversupplied market next year.

"EIA assumes the production cuts from OPEC and Russia will remain in place through the end of the forecast period in 2020. With production restraint from most OPEC members, continuing sanctions on Iran, and ongoing declines in Venezuela's crude oil production, EIA expects OPEC production to fall in 2020. EIA forecasts that increased non-OPEC production will more than offset those declines," said the agency in its monthly report this afternoon.

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Liubov Georges