DTN Oil

CRANBURY, N.J. (DTN) -- Nearest delivered crude contracts on the New York Mercantile Exchange and Intercontinental Exchange shook off early weakness to end with robust gains Monday while RBOB and ULSD futures pushed higher, with oil futures rallying during market-on-close trade after the Federal Reserve Board at 2 p.m. ET announced it would extend its bond buying program to U.S. corporate bonds.

The U.S. dollar weakened on the Fed announcement, with the June contract settling down 0.327 at 96.978 in light volume index trading, lending additional support for West Texas Intermediate futures.

At settlement, NYMEX July WTI futures were up $0.86 at $37.12 per barrel (bbl), with ICE August Brent gaining $0.99 to $39.72 bbl. NYMEX July RBOB futures rallied $0.0414 with a $1.1657 gallon settlement, and the July ULSD futures contract ending $0.356 higher at $1.1370 gallon.

In an update to its Secondary Market Corporate Credit Facility, the Fed said it would "begin buying a broad and diversified portfolio of corporate bonds to support market liquidity and the availability of credit for large employers," sparking a rally in oil futures.

Corporate bonds need to have been issued by U.S. companies, and meet certain central bank criteria, with the Fed adding that the corporate bond portfolio will complement its current buying of exchange traded funds. The funding comes from the $75 billion in equity provided by the CARES Act, which was signed into law on March 25 to counter government lockdowns and lost economic growth amid the COVID-19 pandemic.

After initially rallying on the Fed announcement, major equity indices gave up most of the day's gains to trade little changed late afternoon.

The central bank will remain in the news this week, with Fed Chairman Jerome Powell to provide testimony in his Semiannual Monetary Policy Report to the Congress before the U.S. Senate's Committee on Banking, Housing and Urban Affairs 10 a.m. ET Tuesday, and before the U.S. House of Representatives Committee on Financial Services at 12 p.m. ET Wednesday.

Also Monday afternoon, the Energy Information Administration said it projects a 93,000 barrels per day (bpd) decline in July oil production in the seven tight U.S. oil basins to 7.632 million bpd, with all regions expected to ease from June's output rate.

The International Energy Agency Tuesday morning will release its monthly Oil Market Report, with the Organization of the Petroleum Exporting Countries publishing its Monthly Oil Market Report Wednesday morning. Both reports will provide their latest expectations for global oil supply and demand for 2020, and official crude production by OPEC members for May.

Brian L. Milne can be reached at brian.milne@dtn.com

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