Crude Futures Settle Lower Ahead of API

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 erased earlier gains to finish Tuesday's session mostly lower under pressure from a modest rebound in the U.S. dollar index, with traders turning cautious ahead of the weekly rundown of inventory data from the America Petroleum Institute due out at 4:30 p.m. EDT.

Market participants expect U.S. commercial crude oil supplies to decrease by about 2.9 million barrels in the week ended Aug. 7, while gasoline stockpiles are expected to have decreased by about 2 million barrels (bbl). Distillate stocks are seen down about 1 million bbl in the reviewed week.

On the session, West Texas Intermediate futures for September delivery settled down 33 cents at $41.61 bbl and the spot month international Brent crude contract fell 49 cents to $44.50 bbl. NYMEX ULSD September futures edged slightly to $1.2384 gallon and front-month RBOB futures slumped 2.48 cents for $1.2045 gallon settlement.

Markets got an early bump from reports Russia has registered the first coronavirus vaccine on Tuesday, though the announcement drew criticism from medical experts. The reported vaccine was carried out without a proper Phase 3 trial and was mostly based on military tests. Regardless, Russia now has plans to re-distribute doses of the vaccine to essential workers, including teachers and doctors, testing the safety of the novel vaccine well into fall months.

The breaking news was met with caution and optimism as a safe vaccine can unlock much needed economic growth and spur demand for refined products in the second half of the year.

The U.S. Energy Information Administration in its latest Short-Term Energy Outlook increased its estimates for global oil demand growth in 2020 and 2021, although acknowledging many uncertainties related to mitigation and reopening efforts related to COVID-19 persist. The agency upgraded worldwide crude consumption by 250,000 barrels per day (bpd) for 2020 from the previous forecast to average 93.14 million bpd, while projecting demand next year will jump to 100.16 bpd. The agency assumes global economic growth accelerates 5.6% next year after contracting 5.2% in 2020.

"Global petroleum demand continued to recover in July, but continued growth in global coronavirus cases could bring renewed lockdown measures and presents considerable uncertainty to global oil demand for the remainder of the year" said EIA.

On the supply side, U.S. crude oil production for 2020 was revised lower by 370,000 bpd from the previous forecast to average 11.3 million bpd while output for 2021 is seen at 11.1 million bpd. Recently released EIA data show that average monthly U.S. oil production for May was 1.2 million bpd lower than the July Short Term Energy Outlook forecast from EIA, indicating more extensive production curtailments than previously estimated.

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

Liubov Georges