WTI Ends at 12-Week High

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearest delivery oil futures on New York Mercantile Exchange and Brent crude on Intercontinental Exchange continued higher in afternoon trade Tuesday. Front-month West Texas Intermediate inched closer towards $40 per barrel (bbl) as investors increased their bets Organization of the Petroleum Exporting Countries and Russia-led partners would agree on additional cuts at their virtual conference this week.

Tuesday afternoon, traders also positioned ahead of weekly inventory data from American Petroleum Institute due out 4:30 p.m. EDT, followed by official report from the U.S. Energy Information Administration at 10:30 a.m. EDT Wednesday. Markets expect U.S. crude oil supplies to have increased 3 million bbl during the week ended May 29, with the domestic refinery run rate seen gaining 1% to 72.3%. Industry data released late Monday showed a fourth consecutive crude drop at the key Cushing supply depot in Oklahoma, the delivery location for the WTI futures contract. In the previous week, supplies at the Cushing tank farm fell 3.395 million bbl, sliding below the five-year average to 53.462 million bbl.

Gasoline stockpiles are estimated to have jumped 1 million bbl on the week and distillate fuel inventories, including heating oil and diesel, added 2.7 million bbl. Estimates for distillate stocks range from an increase of 1 million bbl to as high as 6.4 million bbl, with demand for middle of the barrel fuel expected to stay depressed for months. Domestic economy is now forecast to contact by a shocking 50% in the second quarter, according to new estimates from Atlanta Federal Reserve. Distillate fuels are mostly used in manufacturing, freight transportation, farming and mining, with volume of distillates supplied to the domestic market, a proxy for demand, almost 14% below the same point a year ago.

At settlement, NYMEX WTI July futures jumped $1.37 or 3.6% to $36.81 per bbl and Brent crude for August delivery advanced $1.25 to $39.36 per bbl, with both crude benchmarks reaching their highest settlements on the spot continuous charts since early March. NYMEX ULSD July futures rallied 6.31 cents to an eight-week spot high $1.0921 gallon and front-month RBOB July contract advanced 3.63 cnets to near a 12-week high $1.1028 gallon.

Market focus this week is likely to remain on the upcoming OPEC+ meeting expected Thursday, although no official confirmation has yet been issued. Traders seemed to have increase their bets producers would extend existing 9.7-million-barrel-per-day (bpd) cuts for at least one to two months. Some reports, however, suggest Saudi Arabia and Russia continue to bicker over the length of those cuts, with Riyadh insisting on three-month extension while Moscow favors a one-month rollover.

Under the OPEC+ deal agreed to April 12, the 9.7 million bpd cuts were due to run through May and June, scaling back to 7.7 million bpd from July to December. Saudi Arabia and Gulf allies have been pushing to keep deeper cuts in place for far longer, citing an uncertain path for demand recovery in the summer months.

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

Liubov Georges