Oil Futures Flat in Wednesday Trade

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on Intercontinental Exchange were little changed in pre-inventory trade early Wednesday, with the U.S. crude benchmark trading above $26 per barrel (bbl) after industry data reported a larger-than-expected draw in gasoline stocks and U.S. President Donald Trump pushed for a "Phase Two" reopening of the U.S. economy, spurring bullish sentiment for an imminent recovery in fuel demand.

NYMEX June West Texas Intermediate futures faded from overnight gains, trading flat near $24.65 bbl, with the international crude benchmark July Brent contract slightly higher above $31. NYMEX June ULSD futures reversed down 1 cent to near $0.8860 gallon, and June RBOB futures were little changed near $0.9035 gallon, moving off an eight-week spot high $0.9346 gallon. American Petroleum Institute late Tuesday reported gasoline stocks in the United States decreased 2.237 million bbl last week, bullish against expectations for a 1 million drop.

Traffic data showed mobility index pushed divisively higher in the final week of April, as more states moved to reopen businesses and relax "stay at home" orders. In contrast, distillate supply soared 6.143 million bbl in the reviewed week. Data also showed commercial crude oil supplies increased 8.440 million bbl, rising more than 67 million bbl over the last six weeks. At the Cushing, Oklahoma-hub crude stocks increased 2.681 million bbl last week.

Investment bank UBS revised higher its estimates for global oil demand growth this year, while also projecting a faster pace for a market rebalance versus its previous forecast. "We still expect oil demand to contract strongly this quarter, though not as much as we did before; we now estimate minus 15 million barrels per day year on year for 2Q, versus minus 20 mbpd previously," UBS said. UBS analysts see global oil production falling nearly 6 million bpd year-on-year, with producers in North and South America accounting for most of the decline.

According to these projections, the oil market would balance in the third quarter and become undersupplied in the fourth quarter, leading to new production increases from countries within the OPEC+ coalition. "Non-OPEC oil production is likely get hit hard by low prices, causing production to be shut in as well in 2H20," the analysts said.

At the same time, key global oil producers, Russia and Saudi Arabia rapidly scaled back crude output in the past week, according to industry sources. Russian oil and gas condensate production in the first five days of May fell to a decade-low 9.5 million bpd as the country began reducing output to meet an 8.5 million bpd quota for May and June. Saudi Arabia, OPEC's de-facto leader, is seen reducing crude exports to a decade-low 6 million bpd in May, according to industry sources. Asia is projected to account for 4 million bpd of that total and the United States is seen importing less than 600,000 bpd of Saudi crude.

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