Benchmark Crude Futures Edge Higher

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange settled mostly higher on Tuesday. However, all contracts retreated from the intraday highs after a Bloomberg report suggested existing tariffs on China's exports will remain in effect until after the United States presidential election, raising some doubts over the extent of the agreement.

Also Tuesday afternoon, traders positioned ahead of the release of weekly supply data on U.S. crude and product inventories for the week ended Jan 10. Participants mostly expect commercial crude stocks to have increased by 500,000 barrels (bbl) on the week, while gasoline stockpiles are seen up 3.2 million bbl and distillate stocks up 1.1 million bbl. Refinery run rates likely fell 0.2 percentage points.

The American Petroleum Institute will publish its weekly data at 4:30 p.m. EST while statistics from the U.S. Energy Information Administration are set for release Wednesday at 10:30 a.m. EST.

In the market-on-close trade, NYMEX February West Texas Intermediate crude futures moved up $0.15 to $58.23 per bbl. A surge by the U.S. dollar, which climbed to 97.094 in afternoon index trade, capped advances for the WTI contract through most of the session.

ICE March Brent futures gained $0.29 to a $64.49 per bbl settlement after briefly breaking through $65 bbl mid-session.

NYMEX February RBOB futures declined 0.29 cent to settle at $1.6544 gallon, and NYMEX February ULSD futures added 1.23 cents to $1.9103 gallon settlement.

After declining for five straight sessions, crude futures ended Tuesday's trade modestly higher amid some emerging skepticism that the phase-one trade deal will not go far enough to boost global economic and fuel demand growth.

Bloomberg news reported the Trump administration plans to keep in place the existing $360 billion worth of tariffs against China for the next 10 months, and any move to reduce them will depend on their compliance with the terms of the agreement.

Wire services have reported that China pledged to purchase at least $200 billion in U.S. exports, including $75 billion in manufactured goods, $50 billion in energy, $40 billion in agriculture and $35 billion in services. Some analysts, though, have already begun to question the enforcement mechanism for the pledged purchases.

Also weighing on the complex, EIA in its latest Short-Term Energy Outlook forecast domestic crude production will hit a record-high 13.3 million barrels per day (bpd) this year with domestic producers next year seen ramping up output to 13.7 million bpd. The agency maintained its projections for increased rig efficiency and well-productivity gains, which would continue to offset the decline in the number of drilling rigs.

EIA estimates continued production gains from non-OPEC, with non-OPEC and other liquid fuels production set to rise by 2.6 million bpd this year and 0.9 million bpd in 2021. Forecast growth in the United States contributes 1.7 million bpd and 0.6 million bpd, respectively, in each year.

For the OPEC supply, EIA assumes the cartel will continue to limit production in both years to maintain relative balance in global oil markets, with production averaging 29.2 million bpd this year, down 0.6 million from 2019 while edging up 0.1 million bpd in 2021.

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

(CZ)

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