CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures and Brent futures on the Intercontinental Exchange ended lower Tuesday although off lows, as markets await an expected response by Iran to last week's U.S. strike in Baghdad that killed Iranian General Qassem Soleimani, and in front of weekly supply data from the American Petroleum Institute.
Markets expect a fourth straight weekly decline in U.S. commercial crude supplies occurred during the week ended Jan. 3, with inventory seen to have been drawn down 3.7 million barrels (bbl). Gasoline stocks are estimated to have increased by 4.5 million bbl and distillate fuel stockpiles by 5 million bbl last week. API is set to release its weekly report later Tuesday afternoon, and the Energy Information Administration at 10:30 a.m. EST Wednesday.
At settlement, NYMEX February West Texas Intermediate futures were down $0.57 at $62.70 bbl, and ICE March Brent futures at $68.27 for a $0.64 decline. Both crude benchmarks remain above their Jan. 2 settlements of $61.18 for WTI and $66.25 for Brent ahead of the U.S. strike.
NYMEX February RBOB futures settled down 3.22 cents at $1.7222 gallon, while the February ULSD futures contract erased most of its losses after falling to a better than three-week spot low of $2.0065 gallon, settling down 15 points at $2.0324 gallon. The latest data from the Commodity Futures Trading Commission's Commitment of Traders report shows noncommercial accounts ended 2019 at their most bullish ULSD futures position of the year.
Analysts have debated what action Tehran will take in response to the U.S. strike that killed their highest ranking military leader and strategist that knitted together militias across the Middle East that have attacked U.S. allies and menaced U.S. troops in the region. The single point of agreement is that Tehran will do something, while Bob McNally, founder and president of the Rapidan Energy Group, indicates a "full-blown war remains unlikely" although the odds of a military conflict between Iran and the United States have increased fivefold since Soleimani's death.
The oil market has also taken a wait-and-see posture because of ample global supplies while Saudi Arabia and United Arab Emirates have guaranteed additional oil supply should there be a disruption in the flow of crude from the region.
Softening oil values also follow news Venezuela's state oil firm PDVSA has agreed to joint ventures with Russia's Rosneft and China's CNPC in which the two companies will take over operations of the nation's oilfields. Venezuela has seen its oil production plummet under mismanagement, corruption and U.S. sanctions. Over the weekend, allies of Nicolas Maduro, the disputed president of Venezuela, staged a coup in taking control of the National Assembly from Juan Guaido, who is considered by the United States and most Latin American countries to be the country's lawful leader. There's talk the Trump administration is seeking to tighten sanctions on Venezuela.
Key U.S. equity indexes are lower late afternoon, having dropped back from a string of recent record highs on concern over hostilities between the United States and Iran, but remain underpinned by a sturdy U.S. economy. U.S. unemployment remains at a 50-year low, with the market expecting the Department of Labor to report 155,000 jobs were created in December Friday morning, while the Atlanta Fed's GDPNow forecast for the fourth quarter shows 2.3% annual growth rate.
This morning, the Institute of Supply Management's non-manufacturing index increased a better-than-expected 1.1% to 55% which implies U.S. gross domestic product grew at a 2.2% annualized rate during the final month of 2019, and that December represented the 125th consecutive month in which the U.S. economy expanded.
Brian L. Milne can be reached at firstname.lastname@example.org
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