Oil Futures Near Top of Range

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 moved in narrow ranges early Thursday. West Texas Intermediate January futures held near $61 ahead of the contract's expiration Thursday afternoon, bolstered by a bullish outlook for global economic growth and energy demand in 2020.

In early trading, NYMEX January WTI futures traded unchanged at $60.93 per barrel (bbl), with next-month delivery February at a $0.10 discount to the expiring contract. ICE February Brent were flat near Wednesday's $66.17 bbl three-month high settlement on the spot continuous chart. NYMEX January ULSD futures gained 0.18 cents to $2.0221 gallon and the January RBOB contract was little changed at $1.6838 gallon.

Markets remain upbeat over the prospect of stronger oil demand next year spurred by a de-escalation in U.S.-China trade tensions that is seen bolstering global trade flows and economic activity.

China announced Thursday it would resume purchases of oil and chemical products from the United States in 2020, including refined liquids and petroleum waxes. Wood Mackenzie analysts believe new tax exemptions would directly benefit such American companies as Exxon Mobil, Dow Chemical and Chevron that have been adding shale-based chemical production facilities and targeting China as a prime export market. Analysts estimate the combined value of these purchases would stand above $14 billion based on these two products alone. Beijing said it would soon unveil the second list of American products exempt from taxes.

Both sides acknowledged they are actively engaged in negotiations to secure the second phase of the agreement. According to various reports, U.S. President Donald Trump is aiming to reach a full comprehensive deal before the 2020 presidential elections.

Oil futures are trading on either side of Wednesday's shallowly mixed settlements after inventory data showed a smaller-than-expected 1.1 million bbl drawdown from U.S. commercial crude stocks during the second week of December and large builds in product supply, even as refinery run rates have stalled. U.S. commercial crude inventories are currently 4% above the five-year average. After building for five straight weeks, gasoline inventories sit 5% above their five-year average and distillate stockpiles surged to their highest inventory level since early October but are still about 7% below the five-year average.

The year-on-year supply disposition for distillate fuel quickly changed in December, with forward supply increasing 3.3 days during the first half of the month while a year ago they fell 1.7 days during the comparable two-week period.

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

(CZ)

Liubov Georges