DTN Oil

WASHINGTON (DTN) -- Nearest delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange edged higher in afternoon trade Tuesday, with gains accelerating after the U.S. Energy Information Administration revised lower its outlook for U.S. crude production for both 2020 and 2021. Demand is projected to climb over the reviewed two-year period as the global economy gradually recovers.

Tuesday afternoon, traders also positioned ahead of weekly inventory data to be released by the American Petroleum Institute at 4:30 p.m. EDT, with expectations for crude oil stocks to decrease by about 1.6 million barrels (bbl) during the week ended June 5. With refinery runs expected to increase around 0.9%, markets expect gasoline stocks to build by 2 million bbl and distillate stockpiles projected to have increased 3.8 million bbl on the week. Distillate fuel demand has been lagging far behind that of gasoline use in the United States and elsewhere, with air travel, retail and manufacturing sectors having been the worst affected by the coronavirus pandemic. The U.S. economy has been in recession for over three months now, the National Bureau of Economic Research said this week, with February marking the end of a 128-month long expansion.

On the session, NYMEX West Texas Intermediate July futures clawed back $0.75 to settle at $38.94 bbl, holding below Monday's $40.44 bbl three-month spot high. Brent crude for August delivery gained $0.38 to settle at $41.18 bbl. NYMEX RBOB July futures firmed 1.53 cents to $1.2103 gallon, and ULSD July futures advanced 3.34 cents or 3% to $1.1547 gallon.

The EIA on Tuesday lifted its estimate for global oil demand growth by 180,000 barrels per day (bpd) to 99.71 million bpd next year, while maintaining a forecast for 2020 at 92.53 million bpd. A sizable year-on-year gain reflects a projected rebound in global oil economy and by extending demand for fuels. Global oil supplies, however, are forecasted to have declined this year as a result of voluntary production cuts from members of the Organization of the Petroleum Exporting Countries and partner countries, as well as from rapid declines in tight oil production in the United States.

Domestically, the agency sees crude production to decline 700,000 bpd to 11.6 million bpd in the current year and fall further to 10.6 million bpd in March 2021 before increasing slightly through the end of 2021. Next year, EIA expects U.S. crude oil production would average 10.8 million bpd.

For the latest update on U.S. weekly output, markets look to EIA's inventory report to be released 10:30 a.m. EDT Wednesday.

Internationally, Libya was back in the spotlight this week after General Khalifa Haftar declared a unilateral ceasefire with the United Nations' recognized government in Tripoli on Sunday, allowing for a partial restart of production at the country's southern fields, Sharara and El-Feel. Tuesday reports, however, suggest that his forces carried out yet another vicious attack against workers at the fields, with Libya's National Oil Corporation declaring a force majeure on exports from the fields, saying an armed group had shut-in production again just 48 hours after it had resumed. The situation remains fluid.

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

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