Crude Futures Down Tuesday

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearest delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled Tuesday session mixed. Both crude benchmarks are remaining under the pressure ahead of pivotal U.S. inventory data, stockpiles hitting fresh record-highs for three straight weeks and the potential return of Libya's 1.2 million barrel-per-day (bpd) production amid reported progress in peace talks.

At settlement, U.S. benchmark West Texas Intermediate shed $0.43 to $39.27 per barrel (bbl) and Brent crude futures for August delivery rolled off the board at $41.15 bbl, down 56cts while the new front-month Brent September futures settled down $0.58 at $41.27 bbl.

NYMEX ULSD July contract expired 1.27 cents higher at $1.1781 a gallon, with fresh front-month delivery August futures settling with 0.84 cents premium to expired contract. NYMEX RBOB July futures jumped 1.60 cents upon expiration to $1.2001 gallon and front-month delivery August contract ended the session at $1.2015 gallon.

Oil traders await weekly inventory reports on U.S. crude and product supply for the week-ended June 26, with analysts calling for an increase of 1.5 million barrels in crude-oil stocks. Domestic crude supply has risen for three straight weeks during the month of June to a record-high 540.7 million barrels, according to the Energy Information Administration, indicating just how steep demand destruction has been during the coronavirus lockdown. Demand recovery is far from certain now as more states enact new measures to contain the spread but concomitantly hinder their re-opening plans. Thirty-six U.S. states are now reporting an upward trend in coronavirus infections, with at least 12 of them pausing or reversing plans to further re-open businesses. Goldman Sachs analysts estimate renewed lockdowns would subtract nearly 5% from U.S. gross domestic product.

In refined products, markets expect motor gasoline inventories to have decreased by 1.8 million barrels on week and distillate stockpiles are projected to decline by 1.6 million barrels. Refinery run rates are seen to have increased 0.3% on week.

Crude futures came under selling pressure earlier in the session after overnight reports indicated Libya's oil output might be returning back to the global markets following breakthrough in month-long peace talks. Libya's National Oil Corp. seemed to have pushed for restart of the country's two largest oilfields, El Sharara and El Feel, with combined capacity of 1.2 million bpd. Libya has limited storage capacity and able to ramp up export capacity fairly quickly, meaning more supply could be damped into the market suffering from depressed demand growth. Libya's crude production is currently as low as 70,000-80,000 bpd.

In financial markets, U.S. stock indexes booked the best quarter in nearly twenty years on Tuesday, shrugging off rampant unemployment numbers and uncertain path out of pandemic-fueled recession. Federal Reserve Chairman Jerome Powell and Secretary Treasury Steven Mnuchin warned of the many challenges ahead as U.S. economy attempts to bounce back. "While this bounce back in economic activity is welcome, it also presents new challenges, notably, the need to keep the virus in check," Powell said.

Steven Mnuchin said the Treasury and Fed were looking at extending the Fed's established 11 emergency lending facilities, but also reiterated that additional types of financial aid likely will be need under the next phase of stimulus.

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

Liubov Georges